Defamation - Case Law

Wednesday, January 31, 2007

 

Shah v Standard Chartered Bank

Shah and Another v Standard Chartered Bank
[1999] QB 241, [1998] 3 WLR 592, [1998] 4 All ER 155, [1998] EMLR 597
Court of Appeal (Civil Division)

Hirst and May L.JJ. and Sir Brian Neill

Defamation - Pleadings - Striking out - Defence of justification - Whether necessary to focus on conduct of plaintiff giving rise to reasonable suspicion - Repetition of reports or assertions of others - Whether defendant required to establish objectively reason- able grounds for suspicion - Whether sufficient to establish honest and reliable source for information

The defendant bank was the victim of a major fraud. An employee of the defendant, together with a private investigator said to be acting on its behalf, held two separate meetings with Bank of England officials in July 1992. According to the plaintiffs, the defendant's two representatives told the officials that the plaintiffs had illegally laundered the proceeds of the fraud through a banking corporation of which they were respectively chairman and deputy chairman. In October 1992, on the Bank of England's motion, provisional liquidators for the plaintiffs' banking corporation were appointed. There was no evidence of the plaintiffs' complicity in money laundering, but the Bank of England subsequently ruled on other grounds that the plaintiffs were not fit and proper persons to be engaged in the direction of a bank. The plaintiffs brought an action for slander and libel arising from what was allegedly said by the defendant's representatives to the Bank of England officials and from the contents of notes for record made of the meetings by Bank of England staff, on the basis that republication in the notes within the Bank of England was the natural and probable consequence of what was said at the meetings. The plaintiffs also sued for libel arising from a written report handed to Bank of England officials by the defendant's representatives at the second of the two meetings. The defendant pleaded justification on the basis that there were strong grounds to suspect the plaintiffs of having assisted the fraudster to launder the proceeds of the fraud, that there were some grounds to suspect the plaintiffs were not, as they claimed, the beneficial owners of their banking corporation but that it was secretly owned by the fraudster and, in relation to the alleged libel arising from the defendant's employee's statement to Bank of England officials, that there were sufficient grounds for suspicion to warrant putting the matter before the police or the Serious Fraud Office for them to consider opening an investigation. The judge dismissed an application by the plaintiffs under R.S.C., Ord. 82, r. 3A for a determination that the words complained of were not capable of the meanings pleaded in and then sought to be justified by the defendant and made no order on an application under Ord. 18, r. 19 for the striking out of the particulars of justification pleaded in the defence.

On appeal by the plaintiffs and on applications by both parties to amend the pleadings: -
Held, allowing the appeal in part and granting leave for certain of the amendments sought by the defendant, (1) that, although each of the publications was capable of imputing actual guilt of money laundering, the words complained of, when considered in their context with the qualifying words and reservations in the surrounding text, were in each case capable of bearing a meaning of no more than reasonable suspicion; that the defendant's employee's statement to bank officials was too tentatively phrased to be capable of meaning that the plaintiffs had given good cause for criminal prosecution and merited reporting to the police and the Serious Fraud Office and the claim in respect of the meaning attributed to the words by the plaintiffs would be disallowed; that the defendant's amendment to plead that there were sufficient grounds for suspicion of the plaintiffs was inconsistent with its existing plea that there were strong grounds for doing so and should be disallowed; and that the defendant's amendment to plead that the Bank of England representatives knew that the purpose of the meetings was to seek the assistance of the Bank of England in determining whether the allegations and suspicions were well founded would be disallowed unless the defendant gave full particulars of such an explicit understanding (post, pp. 604E-H, 605A, 606D-E, 612D-F, 617A).

(2) That it was an essential requisite of a defence of justification on the basis of reasonable suspicion that it should focus on some conduct of the plaintiffs giving rise to reasonable suspicion; but that such a defence did not need to be exclusively confined to allegations of such conduct, since particularly in complicated cases it would be necessary for the defendant to give details of the relevant background and set out material to connect the main facts relied on (post, pp. 608D-E, 612D-F. H, 617A).

(3) That words were to be interpreted, and the imputation they contained justified, by reference to the underlying allegations of fact and not merely by reliance on second-hand reports or assertions of them; that the rule of law which prevented a jury from deciding that a repetition of a defamatory allegation was true or bore a lesser defamatory meaning than the original allegation not only governed the assessment of the meaning of the publication complained of, but also limited the permissible scope of the plea of justification of such a meaning and the admissibility of evidence in support of such a plea; and that, accordingly, it was not open to the defendant to justify the existence of reasonable grounds for suspicion by relying on what someone else had told it, since the defendant had to establish that there were objectively reasonable grounds to suspect the plaintiffs, not that its information had come from an honest and reliable source (post, pp. 609S, 610B-D, 612D-F, 615H, 617A).

Stern v Piper [1997] QB 123, C.A. applied.
Lewis v Daily Telegraph Ltd [1964] AC 234, H.L.(E.) considered.
Aspro Travel Ltd v Owners Abroad Group Plc. [1996] 1 WLR 132, C.A. doubted.
Decision of Ian Kennedy J. reversed in part.



Interlocutory Appeal from Ian Kennedy J.
By a writ amended on 21 June 1996 and a re-amended statement of claim the plaintiffs, Suresh Bhagwanji Raja Shah and Navin Bhagwanji Shah, claimed against the defendant, Standard Chartered Bank, damages for slander published to the Bank of England at two meetings in July 1992 and for libel contained in a report entitled "S.C.B. India - Securities Fraud," extracts of which were published by the defendant to the Bank of England in July 1992 and in notes recording in writing the statements made at the two meetings.

By a re-amended defence re-served on 22 July 1996 the defendant pleaded justification. Paragraph 5A of the defence stated that the words complained of were substantially true in the natural and ordinary meanings that there were strong grounds to suspect the plaintiffs of having, through their Mount group of companies, assisted in laundering the proceeds of a vast fraud on the defendant and that there some grounds to suspect that the plaintiffs were not the beneficial owners of Mount Banking Corporation Ltd, of which they were chairman and deputy chairman respectively, but that it was secretly owned by the fraudster. By summonses dated 16 September and 5 November 1996 the plaintiffs sought to strike out parts of the defence under R.S.C., Ord. 82, r. 3A. On 20 December 1996 Ian Kennedy J. dismissed the summons dated 5 November 1996 and made no order on the summons dated 16 September 1996 save that the defendant have leave to serve a re-amended defence.

By a notice of appeal dated 12 May 1997 the plaintiffs appealed with the leave of the single judge granted on 28 April 1997 for an order that the decision of Ian Kennedy J. be set aside and paragraph 5A of the amended defence struck out under R.S.C., Ord. 82, r. 3A or Ord. 18, r. 19. The grounds of appeal were, inter alia, that (1) the judge should have held that the words complained of were not capable of bearing the meanings sought to be justified by the defendant, and hence should have struck out the plea of justification added by amendment as paragraph 5A;(2) in so far as the words complained of repeated the suggestion of some unidentified third party or parties that the first plaintiff was the frontman for the fraudster, the judge erred in permitting the defendant to justify by reference to a lesser meaning than that of the original suggestion; (3) the judge further erred in holding that the defendant was entitled to justify by reference to grounds for suspicion which were not derived from the conduct of the plaintiffs; (4) the judge was also at fault in permitting the defendant to justify by reference to the existence of grounds for suspicion "at the date of publication of the words complained of and at all material times thereafter up to the date of issue of the writ;" (5) the judge further erred by allowing the defendant to rely on rumours of the plaintiffs' guilt, on the basis that the particulars relied on were "designed to set out what is a circumstantial case."

The facts are stated in the judgment of Hirst L.J.

Desmond Browne Q.C. and Adrienne Page for the plaintiffs.
Richard Rampton Q.C. and Patrick Moloney for the defendant.

Cur. adv vult.

2 April. The following judgments were handed down.

Hirst L.J.

Introduction

This is an appeal by the plaintiffs, Suresh Bhagwanji Raja Shah and Navin Bhagwanji Shah, against the order of Ian Kennedy J. dated 20 December 1996 in favour of the defendant, Standard Chartered Bank ("S.C.B.").

The plaintiffs' claim is for damages for libel and slander, contained in several publications. By their two summonses, both of which were unsuccessful, the plaintiffs sought the following orders: (1) a determination under RSC, Ord 82, r 3A that the words complained of were not capable of the meanings pleaded in and then sought to be justified by the defence; (2) the striking out under Ord 18, r 19 of the particulars of justification pleaded in the defence. The application to strike out, which of course only arises if the appeal fails on the first issue, raises not only points of principle, but also a number of detailed questions relating to the individual particulars of justification. Consequently the two summons fall to be determined entirely separately.

During the course of the hearing before us it became clear that the pleadings as presented to the judge, and as they stood at the outset of the appeal, were in several respects unsatisfactory. As a result, leave to make very substantial amendments to the statement of claim was sought by Mr Desmond Browne on behalf of the plaintiffs, and these in turn led to an application for leave to make substantial amendments of the defence by Mr Richard Rampton. In this judgment I deal in the first instance with the pleadings in their final form, as presented for leave to amend, so that the issues presently determined in these judgments are not identical to those considered by the judge.

The background

The plaintiffs, who are brothers, were respectively the chairman and deputy chairman of Mount Banking Corporation Ltd ("Mount") until 3 October 1992 when the bank was wound up by order of the court SCB is a hank incorporated in England by royal charter.

In 1991-92 SCB was the victim of a major fraud said to have been committed upon it by a large number of Indian brokers, other people in the financial sector, and two of its employees. This fraud came to light in May 1992 and amongst those suspected of involvement in the fraud was a Mr Bhupen Dalal ("BD"). Shortly thereafter in a number of communications to the Bank of England SCB made a number of allegations against Mount, inter alia (according to the plaintiffs' case) that they had illegally laundered the proceeds of Dalal's fraud on SCB through Mount.

Thereafter in July 1992 the Bank of England made an emergency application for the appointment of provisional liquidators for Mount which came ex parte before Millet J on 3 October 1992, and led to his making the order sought. This application was supported by an affidavit of Mr David Green, the deputy head of the banking supervision division of the Bank of England, in which these allegations formed a substantial part; indeed the judge said when making his order that the only really serious allegation in Mr Green's affidavit was one of money laundering.

Subsequently the Bank of England ruled that the plaintiffs were not fit and proper persons to be engaged in the direction of a hank, but the allegation of money laundering did not form part of the material ultimately relied upon, as is shown by the findings of the Banking Appeal Tribunal on 13 October 1993, and the judgment on appeal from that tribunal of Vinelott J on 29 July 1994, in which he stated:

"I should mention at the outset that no evidence of complicity in money laundering has ever been discovered and this matter does not form one of the charges later brought against the Shahs. The incident is only relevant inasmuch as it was the trigger which later led to intervention by the Bank:" see Shah v Governor and Company of the Bank of England [1994] 3 Bank LR 205, 208.

The defamations complained of

The original cause of action in slander were based on identical words allegedly spoken to Bank of England representatives at two separate meetings in July 1992 by Mr Harwood, a private investigator whom the plaintiffs allege, and SCB deny, was acting on behalf of SCB as their agent, and by Mr Reed, an employee of SCB. This original slander, as alleged in the statement of claim, is as follows:

"In the early months of 1992, Suresh Shah knowingly helped Bhupen Dalal, one of those charged in India in connection with the securities market scandal to launder the substantial proceeds of this fraud via Dubai, through Mount and then back to India. The Shahs may not be Mount's beneficial owners, but acting as a front for Dalal $150m of funds from Bhupen Dalal has been laundered by Mount Banking Corporation. Suresh has arranged for the purchase of $70m of India Development Bonds and $80m of non-resident deposits on Dalal's behalf. The funds for the purchase were routed through ANZ Dubai."

This form of words stems from an account of the conversation given by Mr Green in his affidavit, though he was not present.

In its defence SCB admits the occurrence of both meetings, but denies that the words or words to the like effect were spoken on the respective occasions.

The two conversations were recorded in writing by Bank of England officials in two notes for record, and by two further or alternative pleas the plaintiffs put forward two additional causes of action in slander based on the version of the two conversations as contained in those two notes for record, in effect translating the relevant parts of the notes from oratio obliqua to oratio recta, as follows.

The Harwood slander

"I am a private investigator with considerable experience in finance-related investigations. My client this time is Standard Chartered Bank and I am currently undertaking an investigation into Mount Banking Corporation related to the recent Indian Government security scandal in which Standard Chartered have been affected and have incurred losses of L200m plus . . . Mount Banking Corporation is linked with that scandal . . . The funds [meaning thereby the funds realised from that scandal] are likely to have been remitted via Dubai, a known stop-off point for funds washed from India. Bank of America, one of Mount Banking Corporation's agent banks in India, was also used in the transaction chain . . . The corporate route of the funds to Mount Banking Corporation could have been direct from Snow India, or via a UK company called CIFCO (UK) Ltd, to whom Mount Banking Corporation are bankers . . . There is a correlation between Mount Banking Corporation's increases in capital and previous financial scandals in India . . . Have Mount Banking Corporation's activities come to the Bank of England's attention before now?"

(I should note in parenthesis that objection is taken by Mr Rampton to two phrases ("Mount Banking Corporation is linked with that scandal" and "one of Mount Banking Corporation's agent banks in India") on the ground that they must have been interpolations by the Bank of England rather than words spoken by Mr Harwood, but I regard that as a small matter to be resolved at the trial and not at this stage.)

The Reed slander

"I have decided to approach you following the meeting you had with Mr Harwood, one of Standard Chartered's private investigators . . . Standard Chartered has two investigations running in parallel into the recent Indian Government securities scandal . . . I will go through the main points which our investigation has raised (i) Suresh Shah, chairman of Mount Banking Corporation, is the banking frontman for Bhupendra Dalal, the key individual in the scandal and under arrest in India for his part in it. I have been informed of the link between Shah and Dalal by my contact at India's Central Bureau of Investigation (ii) I subsequently received further information from a journalist in India which indicated that Dalal had managed to channel US$150m of the proceeds from the scam to ANZ in Dubai (or possibly Bank of America but I think Bank of America may not have a branch in Dubai) with further sums going on to Switzerland. From Dubai Shah purchased for Dalal US$70m of Indian Development Bonds and US$80m of non-resident deposits, both of which can provide anonymity to holders. Shah then took the IDBs back to India for Dalal (iii) I have not as yet been able to establish a direct link between Dalal and Shah nor whether Shah acted bona fide in the aforementioned transactions; the evidence I have received on the matter so far has been purely circumstantial. Shah is likely to be aware that his associations with Dalal are being scrutinised by the Indian authorities, but not necessarily by Standard Chartered Bank. The Central Bureau of Investigation promised to show me the path of the funds about a month ago but has not done so yet . . . (iv) Our investigation has suggested that the other key associates of Dalal are Mr Kalyanapuram Sampath, a lawyer, Dalal's main man in the UK responsible for setting up companies for him. He appears to be a director of CIFCO (UK) Ltd, which has an account with Mount Banking Corporation . . . (v) There is a correlation between Mount Banking Corporation's increases in capital and the Shahs' losses in Kenya . . . I have not yet got round to speaking to the UK police, but will be speaking to the City of London Fraud Squad (John Todd) and the Serious Fraud Office once the required information arrives from the Central Bureau of Investigation. I want to establish the precise movement of the funds [meaning thereby the proceeds of the fraud], where they ended up and when. Mount Banking Corporation is not a hank at all and simply a vehicle through which Dalal launders funds . . . Here is a copy of a summary of points our investigation has produced. There are other documents you can see but not take copies of. SCB's loss in the scandal was to the order of L150m, though part of this has already been provided for . . . I feel that the funds can be recovered by tracing them, or obtaining an attachment to proper order from the Indian courts and applying it to the property of those accused, or by the accused agreeing to return funds to reduce their sentences."

The first two causes of action in libel are based on passages quoted from those same notes for record, it being the plaintiffs' case that the republication in writing within the Bank of England of the contents of the two alleged conversations was the natural and probable consequence of the original publication of the two slanders. The full texts of these two notes for record are as follows with the words complained of italicised:

The Harwood libel

"Mount Banking Corporation Ltd ('MBC') -- Alleged link with Indian stock market scandal

"1. At his request, Joe Harwood, a private investigator from Harwood & Co, came in to the Bank on 15 July to talk to Chris Sparkes ('CJCS') about an investigation into MBC he was currently undertaking for 'a leading city institution;' JJ was also present. CJCS explained the confidentiality constraints of the Banking Act and his own absence of detailed knowledge of MBC. Thus, any comments should he taken as general and not specific to MBC. Harwood recognised this and stressed (and it was accepted) that he was speaking in confidence.

"2(i) Harwood opened by saying that he had considerable experience in finance related investigations, having previously carried out investigations for . . . where he knew . . . reasonably well. (ii) Harwood's client this time, however, was Standard Chartered and the investigation related to the recent Indian Government securities scandal in which it had been affected (along with ANZ Grindlays, Citibank and Bank of America) and had incurred significant losses (GBP200m plus according to Harwood). (iii) . . . Harwood said that these funds were likely to have been remitted via Dubai (which is apparently a known stop off point for funds washed from India) and that Bank of America (we knew them to be one of MBC's agent banks in India) was also used in the transaction chain . . . (iv) The ultimate remitter of the funds was alleged to be an Indian company called Snow India Ltd (see attached organogram) . . . but was now independent. The corporate route of the funds to MBC could have been direct, from Snow India, or via a UK company called CIFCO (UK) Ltd (to whom MBC are alleged to be bankers) . . . Harwood gave the names of the latter as TB Ruia, PB Ruia . . . Dalal and Dalal . . . (The Financial Times of 7 July listed some of those facing charges of which two are named Dalal -- the others do not tie up with Harwood's list).

"3(i) Harwood also suggested there was a correlation between MBC's increases in capital (which he presumably obtained from public sources) and previous financial scandals in India. CJCS said that there were numerous reasons why banks should inject capital and that the Bank was not always in a position to know the source of such funds but we would nevertheless look into the matter. CJCS went on to say that the only information we could impart at this stage, was that MBC's main shareholders had excessive East African links having owned a Coca-Cola bottling plant in Kenya and that one of the Shahs spent a short time in jail there (ii) Harwood asked how frequently Bank 'inspectors' visited MBC. Talking of our supervision in general, CJCS said that it varied because there was a range of tasks that would need to be undertaken as part of the regular ongoing system of supervision (iii) Finally, Harwood wondered whether MBC's activities had come to the Bank's attention earlier. CJCS simply noted that allegations against ethnic banks in particular, had come to the Bank in recent times partly because of their different business practices.

"4. CJCS concluded the meeting by saying that we would take the matter away and discuss it with colleagues. Harwood said that he would do the same with a view to coming into the Bank again with the aforementioned documentation. He gave his address and telephone number as . . .

"Action points

"5(i) CJCS to confirm with . . . of . . . that Harwood is kosher. (See CJCS's [note for record] of 17.7.92 -- copy attached.) (ii) JRC and Group 9 to liaise with DMS and Group 4 o/a Standard Chartered. (iii) JJ to check names and companies mentioned, against I & R and recent MBC returns/papers etc."

The Reed libel

"Mount Banking Corporation Ltd ('MBC') -- Indian Government securities scandal

"1. Derek Reed -- Standard Chartered Bank's ('SCB') group security adviser -- came into the Bank on 29 July to talk to Chris Sparkes ('CJCS') about MBC's alleged role in the recent Indian financial scandal; JJ was also present.

"Background

"2. Reed had decided to approach us following a meeting with one of SCB's private investigators -- Joe Harwood -- who had met with CJCS last month (see my [note for record] of 20.7.92). Reed had not previously appreciated that we would deal with people such as Harwood, who had suggested to him (ie Reed) that he had the 'ear' of the Bank. Reed was willing to pursue any legitimate channel which would assist him in the investigation. CJCS indicated that the Bank had an 'open door' to listen to matters such as this and took each issue seriously; he also said that any matters disclosed to the Bank were accepted in complete confidence but that the Banking Act restrictions did not make this a two-way process. CJCS went on to say that Harwood would appear to have misrepresented the relationship -- we did not know him before his offer to speak. We had concluded after our meeting with Harwood, that we would want to liaise with SCB at some point both to ensure that Harwood was indeed working for them and to get a first-hand account of the facts.

"Organisation of the investigation

"3(i) Reed explained how the investigation was organised. SCB had two investigations running in parallel; the first was headed up by Reed himself and geographically, was concentrated mainly in India. He had used Lyndon management consultants (?) to assist him in India but this arrangement had recently been terminated. The second strand of the investigation focused on the UK for which, mainly because of the lack of manpower, private investigators had been hired. (ii) The main firm of private investigators engaged by SCB had been 'Corporate Investigations' the proprietor of which, Sam Cavanan, he knew well; it had in fact been Cavanan who subcontracted part of the investigation to Harwood. Reed had been surprised by the rapid progress made by the UK investigators. He had, however, met Harwood a couple of evenings before at Corporate Investigations' premises and was singularly unimpressed with him; this prompted Reed to speak to the Bank personally to avoid any misunderstandings that might arise via Harwood. At the end of the meeting, CJCS and Reed agreed they would feel more comfortable and risk less misunderstandings if there was direct contact, without Harwood's intervention. Reed will speak to Harwood/Cavanan.

Main features of the investigation

"4. Reed went through the main points which the investigation had raised. (i) Suresh Shah (chairman of MBC) was alleged to be the banking 'frontman' for Bhupendra Dalal who was said to be the key individual in the scandal and was under arrest in India for his part in it. Reed told us that he had been informed of the link between Shah and Dalal by his contact at India's Central Bureau of Investigation ('CBI'). I subsequently learnt that his contact was Madhavan who recently resigned from the Indian Government's inquiry into the matter, in a storm of controversy (see attached press cutting). (ii) Reed subsequently received further information (from a journalist in India) which indicated that Dalal had managed to channel US$150m of the proceeds from the scam to ANZ in Dubai (or possibly Bank of America but Reed thought that they didn't have a branch there (?)) with further sums going on to Switzerland. From Dubai, Shah is said to have purchased for Dalal, US$70m of India Development Bonds (IDBs) and US$80m of NRI (Non-Resident) deposits -- both of which can provide anonymity to holders. Shah is then said to have taken the IDBs back to India for Dalal. (iii) However, Reed has not as yet been able to establish a direct link between Dalal and Shah nor whether Shah acted bona fide in the aforementioned transactions; the evidence he has received on the matter so far has been purely circumstantial. He also said that Shah was likely to be aware that his associations with Dalal were being scrutinised by the Indian authorities (but not necessarily by SCB). The CBI had promised to show Reed the path of the funds about a month ago but had not done so yet; this information might be delayed further or not arrive at all given Madhavan's resignation (though the latter has been quoted in the press as saying that the CBI's inquiry was 'not dependent on one person'). (iv) Reed said that the investigation had suggested that the other key associates of Dalal were: Mr (Kalyanapuram) Sampath -- a lawyer, Dalal's main man in the UK and responsible for setting up companies for him. He appears to be a director of CIFCO (UK) Ltd which is said to have an account with MBC; Messrs Patel -- three persons named Patel, who work for a UK accountancy practice called John Cumming and Partners, were said to be associated with Sampath. Mr Ruia -- is alleged to be another 'Mr Big' in India; he was said to be wealthier than Dalal having made his fortune in the cement market in Dubai. Ruia was alleged to be connected with some of the companies through which funds were channelled -- Reed mentioned George Lillington & Co Ltd and Snowcem (and not Snow India as said by Harwood) in particular; Equatorial Bank -- Reed said that Equatorial's Isle of Man subsidiary (Equatorial Finance Co?) was involved in the setting up of companies for Sampath; Sharesma another Dalal company and Bahamian registered was said to have been used as a vehicle to purchase securities for Dalal. Sharesma was also said to have owned Dalal's UK apartment -- 9, The Water Gardens, Edgware Road; Sampath apparently resides at No 12. (iv) Reed suggested that there was a correlation between MBC's increases in capital and the Shahs' 'losses' in Kenya (Harwood suggested a linkage between increases in MBC's capital and Indian financial scandals); he did not elaborate.

"Other points

"5(i) CJCS asked whether Reed had spoken to the UK police yet. The latter said that he hadn't got round to it but would be speaking to the City of London Fraud Squad (John Todd) and the SFO once the required information arrived from CBI. Reed wanted to establish the precise movement of funds, where they ended up and when (he has suggested subsequently that some transactions may have taken place earlier this year, may be in January). He remarked that MBC was not 'a bank at all' and was simply a vehicle through which Dalal laundered funds. CJCS said that we had no knowledge of that particular point but would talk to the relevant personnel in the Bank about the allegations and revert. Reed gave us a copy of a summary of points the investigation had produced but said that he had other documents which we could see but not take copies of. (ii) Reed said that SCB's loss in the scandal was to the order of GBP150m though part of this had already been provided for. He felt that the funds could be recovered by: tracing them; obtaining an 'attachment to property' order from the Indian courts and applying it to the property of those accused; the accused agreeing to return funds to reduce their sentences."

By its defence the SCB admits that following each of the meetings the Bank of England prepared and published within the bank notes for record summarising what had been said, but otherwise denies the plaintiffs' case in relation to SCB's responsibility for each publication.

The final cause of action in libel is based on a document published to the representatives of the Bank of England at the second of the two meetings referred to above containing extracts from a written report ("the report") prepared by or on behalf of SCB entitled "SCB India/Securities Fraud" containing the following statements:

"5. Mount Banking Corporation Ltd.

"The company was incorporated on 1 March 1982 as I & M Credit Corporation Ltd and changed its name to Mount Credit Corporation Ltd on 31 March 1982. It was authorised as a licensed deposit taker on 9 February 1983. Inquiries regarding Mount Banking Corporation revealed that its chairman is one Suryakant Bhagwanji Raja Shah, also know as Suresh Shah, a resident of Kenya. We understand that Suresh Shah obtained his seed capital from involvement in a Coca-Cola bottling business in Kenya. Intelligence received from a reliable source indicates that he has been convicted of exchange control evasion there and is believed to have served a prison sentence. The ownership of Mount Banking Corporation is concealed and filings indicate that the directors have no beneficial interest. Suresh Shah's involvement on behalf of Dalal in Dubai may indicate that Dalal (or his associates) have some controlling interest in the bank. The capital of Mount Banking Corporation has been substantially built up in recent years and the source of the capital may be suspect. Mount Banking Corporation is associated with Mount Trust SA, Place du Molard 9, PO Box 347, CH1211, Geneva 3, Switzerland. Mount Banking Corporation is also associated with Mount Finance Ltd, a UK company. Information received indicates that BN Patel has been engaged upon work on behalf of Mount Finance during the time of our inquiries. Mount Finance is 50 per cent owned by Nemraj Holdings Ltd a company with an address in Geneva. A search, however, revealed that it is not a Swiss company. Inquiries are being made to establish its domicile. The remaining shares are held 49.9 per cent by Orchid Investments, a Jersey company and 0.1 per cent by I & M Holdings Ltd. Discussions with a large respected institution are taking place which may establish the true ownership of Mount Banking Corporation and whether any funds are at, or have moved through, that organisation. The laundering of US$150m mentioned earlier was thought to have been routed through ANZ. Dubai and Mount Bank (emerging finally in the form of US$70m IDBs and US$80m, NRI deposits). We believe that AZ dealt with Mount Bank from January 1992 onwards as a respected customer. ANZ Bank not only know Mount Bank but also CIFCO. There does not however appear to be any significant ANZ-CIFCO link . . ."

"8. Suresh Shah

"Suryakant Bhagwanji Raji Shah (known as Suresh Shah) dob 23/3/1944, PO Box 45484/484/30238, Nairobi . . . is chairman of Mount Banking Corporation Ltd and also a director of Mount Finance Ltd and Mount Nominees Ltd. He is known currently to be in London and in daily contact with BN Patel. It has been suggested that Suresh Shah is the 'frontman' for Dalal but inquiries have so far failed to substantiate that allegation."

The publication of this report is admitted in the defence.

The defamatory meanings pleaded by the plaintiffs as being borne by the respective publications are as follows:

The original slander and the report

"(1) that, through Mount, the plaintiffs, alternatively the first plaintiff, had illegally laundered $150m of funds on behalf of Bhupen Dalal who had been charged in India in connection with a securities market fraud; (2) that, as the plaintiffs, alternatively the first plaintiff, knew, the said funds illegally laundered through Mount were the proceeds of that fraud; (3) that the plaintiffs and each of them were reasonably suspected of operating Mount as a front for Dalal and his fraudulent activities, their conduct having so warranted that suspicion; (4) that the plaintiffs and each of them were therefore reasonably suspected of having falsely and dishonestly claimed to be the beneficial owners of Mount."

The Harwood slander and libel

"That the plaintiffs were involved in a scandalous Indian securities fraud, in that, through the bank of which they were senior officials, they had knowingly received and illegally laundered the funds realised by that fraud."

The Reed slander and libel

"(1) that, through Mount, the plaintiffs, alternatively the first plaintiff, had illegally laundered L150m on behalf of Bhupen Dalal, the said funds being the proceeds of Dalal's part in the fraud which had led Standard Chartered Bank to sustain a loss of the order of GBP150m; (2) that as the plaintiffs, alternatively the first plaintiff, knew the said funds illegally laundered through Mount were the proceeds of that fraud; (3) that the plaintiffs, alternatively the first plaintiff was the banking frontman for Dalal and Mount, which the plaintiffs operated, was not a bank at but purely a vehicle through which Dalal laundered funds from his fraudulent activities; (4) that the plaintiffs and each of them had therefore falsely and dishonestly claimed to be the beneficial owners of Mount; (5) that, by reason of their said conduct, the plaintiffs and each of them had given good cause for criminal prosecution and merited reporting to the City of London Fraud Squad and/or the Serious Fraud Office."

The defence denies the words bore those meanings, but by the plea of justification seeks to prove the truth of the words, apart from the original slander in different natural and ordinary meanings:

"(i) that there were strong grounds to suspect the plaintiffs and each of them of having, through their Mount group of companies, knowingly and/or illegally assisted Bhupen Dalal to launder the proceeds of his vast fraud on SCB; (ii) that there were some grounds to suspect that the plaintiffs were not, as they claimed, the beneficial owners of Mount, but rather that it was secretly owned in whole or part by Dalal and/or others; (iii) [in relation to the Reed slander and libel only] that there were sufficient grounds for suspicion or concern as to the possible involvement of Mount Bank and the plaintiffs in the disposal of the proceeds of the said fraud, to warrant putting the matter before the Fraud Squad or the Serious Fraud Office for them to consider opening an investigation."

There is also pleaded a defence of qualified privilege and a reply alleging malice with which we are not presently concerned.

RSC, Ord 82, r 3A

The core of the dispute under this heading is whether the references to money laundering are, on the one hand, capable of imputing actual guilt as alleged by the plaintiffs and, on the other hand, whether they are capable of imputing no more than mere reasonable suspicion as alleged by the defendant. This fundamental conflict needs to be resolved before en-barking on consideration of each side's detailed criticisms of the other's formulation of the natural and ordinary meanings in the particulars quoted above.

Mr Rampton's submission in a nutshell was that, apart from the original slander, none of the publications is capable of imputing actual guilt of money laundering having regard to their context within the ambit of each publication taken as a whole. He relies particularly on the passages in the notes for record which are not complained of (the omitted words) which he says colour the meaning of the remainder.

It is very important to bear in mind that at this juncture we are not determining the actual meaning of the words, but delimiting the outside boundaries of the permissible range of meanings within which the tribunal could reasonably find the actual meaning to lie.

In the present case, even making full allowance for the omitted words, I am satisfied that each of the publications is capable of imputing actual guilt of money laundering. The Harwood slander and libel both assert in terms that the funds were likely to have been remitted via Dubai, a known stop-off point for funds washed from India, and that Bank of America, one of Mount's agent banks in India, was also used in the transaction chain; both publications then go on to speculate what the route for the funds to Mount might have been. This seems to me capable of directly implicating Mount in the money laundering, while leaving open the question of how this was achieved. The Reed slander and libel, having in the opening passages referred to the movement of funds, and having stated that "Shah then took the IDB's back to India for Dalal" then asserts, to my mind critically, that Mount is not a bank at all but simply a vehicle through which Dalal launders funds. This last sentence is capable of constituting a direct accusation of complicity in the money laundering. The report presents the weakest case from Mr Browne's point of view, but I have come to the conclusion that the specific reference to "the laundering" in the penultimate paragraph in its context is capable of bearing the same imputation.

Coming now to Mr Rampton's meanings of no more than reasonable suspicion, his argument of course rests principally on the context in each of the publications, and in particular the omitted words with their frequent use of qualifying words such as "alleged," "suggested," "apparently," "said to be," and the like, coupled with the reservations sometimes expressed, such as the statement in the last paragraph of the report that inquiries have so far failed to substantiate that Suresh Shah is the frontman for Dalal. I do not propose to go through these in detail; suffice it to say that I have come to the conclusion that in the case of each of the publications these miscellaneous qualifying words and reservations do render each set of the words complained of capable of bearing a meaning of no more than reasonable suspicion.

As already foreshadowed, in addition to the main points of principle, a number of points of detail arise on the formulation of the respective meanings.

Mr Rampton objects to meaning (5) pleaded in relation to the Reed slander and libel, on the ground that the words from which it is clearly derived (viz the first sentence of paragraph 5(i) of the Reed libel) is phrased much too tentatively to be capable of supporting the positive meaning that the plaintiffs have given good cause for criminal prosecution and merited reporting to the police and the SFO. I agree and would disallow that sub-paragraph, which is sought to be inserted by way of amendment.

Mr Browne's objections to the defendant's pleaded meanings were far more radical. He submitted that the three different gradations ("strong grounds," "some grounds" and "sufficient grounds") are so confusing as to be positively embarrassing to the fair trial of the action, since they are likely to prejudice the understanding of what ought to be quite simple issues. Mr Rampton submitted that the gradations reflect differences in degree of the various levels of suspicion.

Mr Browne also objected to meaning (iii) on the ground that it is inconsistent with meaning (i). This latter objection is in my judgment plainly well founded, and I would disallow meaning (iii), which is sought to be added by way of amendment.

So far as meanings (i) and (ii) are concerned, I consider they are unobjectionable in principle, but think it would be far better if they were both formulated in the orthodox manner alleging reasonable grounds for suspicion. Any differences in degree can be explained to the tribunal of fact forensically.

In addition, Mr Rampton seeks to invoke, in relation to the slanders, a different type of context which he suggests also colours the meanings of the words complained of, as follows:

"Further or in the alternative to the above, as to each of the slanders complained of, the defendant will so far as may be necessary contend that if (which is denied) the words pleaded or words to the like effect were spoken by its representative on that occasion, then by reason of the context in which they were spoken the said words did not bear the meaning or meanings attributed to them by the plaintiff, but rather the meaning or meanings attributed to them at 5A below. (i) As to each of the meetings, the fact that as the Bank of England representatives present well knew from the outset of each meeting, its purpose was not to present to the bank of England firm and well-grounded factual accusations so that it could act in reliance thereon, but rather was to put before the Bank of England material and allegations concerning Mount Bank and the plaintiffs, in order to seek the Bank of England's assistance in determining whether and to what extent that matter and those allegations, and the suspicions which arose from them, were or were not well founded. The words spoken by Mr Harwood and Mr Reed fell to be interpreted consistently with that purpose. (ii) As to each of the said meetings, the full terms of the words spoken at that meeting, in the context of which the words complained of, are to be interpreted. As to the full words spoken by Mr Harwood, the burden of proving them is on the plaintiffs, and no admissions are made; subject thereto the defendant relies on the full terms of the first note for record as evidencing that meeting. As to the full words spoken by Mr Reed, the defendant's case is as set out in his answers to interrogatories."

Mr Browne submitted that this plea, which is sought to be added by way of amendment, is unsustainable since: (1) it is presented much too late; (2) it is wholly implausible in the light of the Bank of England's prompt use of the information before Millett J; (3) It is defective for want of particulars.

Objection 1 goes to discretion, and I would not rule this plea out simply and solely on the grounds of delay. Objection 2 is a powerful argument, but not one on which it would be appropriate for us at this stage to rule out consideration of this plea by the tribunal of fact. Ground 3 on the other hand I regard as a substantial criticism Mr Rampton submitted that be could rely on some inference to be drawn from the publications themselves, but in my judgment the assertion that it was "the fact that as the Bank of England representatives present well know from the outset of each meeting, its purpose was . . ." connotes the existence of an explicit understanding between the Bank of England and SCB either before or at the beginning of each meeting as to its purpose. Mr Rampton told us that he could not presently give particulars of such an understanding (which would clearly involve his obtaining evidence to this effect from the Bank of England) and that he might never be able to do so. In these circumstances I would disallow this amendment unless within 21 days full particulars are forthcoming.

Justification

This part of the case raises important questions of principle as to the permissible scope of the defence of justification of an imputation of reasonable suspicion of guilt.

The two main issues are: (1) whether as the plaintiffs contend such an imputation connotes actual conduct on the plaintiffs' part which warranted such suspicion, so that a defence of justification of such an imputation can only succeed if the defendant both pleads and proves such conduct (the conduct requirement); (2) whether reliance in such a plea of justification on hearsay material infringes the repetition rule: Stern v Piper [1997] QB 123.

I shall consider these two points in turn, and then proceed to apply my conclusion to the actual pleas of justification in the present case.

The conduct requirement

In Lewis v Daily Telegraph Ltd [1964] AC 234, 260 Lord Reid stated:

"Before leaving this part of the case I must notice an argument to the effect that you can only justify a libel that the plaintiffs have so conducted their affairs as to give rise to suspicion of fraud, or as to give rise to an inquiry whether there has been fraud, by proving that they have acted fraudulently. Then it is said that if that is so there can be no difference between an allegation of suspicious conduct and an allegation of guilt. To my mind, there is a great difference between saying that a man has behaved in a suspicious manner and saying that he is guilty of an offence, and I am not convinced that you can only justify the former statement by proving guilt. I can well understand that if you say there is a rumour that X is guilty you can only justify it by proving that he is guilty, because repeating someone else's libellous statement is just as bad as making the statement directly. But I do not think that it is necessary to reach a decision on this matter of justification in order to decide that these paragraphs can mean suspicion but cannot be held to infer guilt." (Emphasis added.)

Lord Devlin stated, at p 284:

"When an imputation is made in a general way, the ordinary man is not likely to distinguish between hints and allegations, suspicion and guilt. It is the broad effect that counts and it is no use submitting to a judge that he ought to dissect the statement before he submits it to the jury. But if on the other hand the distinction clearly emerges from the words used it cannot be ignored. If it is said of a man -- 'I do not believe that he is guilty of fraud but I cannot deny that he has given grounds for suspicion,' it seems to me to be wrong to say that in no circumstances can they be justified except by the speaker proving the truth of that which he has expressly said he did not believe. It must depend on whether the impression conveyed by the speaker is one of frankness or one of insinuation. Equally, in my opinion, it is wrong to say that, if in truth the person spoken of never gave any cause for suspicion at all, he has no remedy because he was expressly exonerated of fraud. A man's reputation can suffer if it can truly be said of him that although innocent he behaved in a suspicious way; but it will suffer much more if it is said that he is not innocent." (Emphasis added.)

In Evans v Granada Television Ltd [1996] EMLR 429, 435 Stuart-Smith LJ stated:

"But the jury are concerned with whether there were reasonable grounds to suspect the plaintiff from an objective point of view. When considering this issue, the other side of the picture is relevant. The defendant cannot fetter the scope of the plaintiff's evidence in rebuttal of the charge."

The question has also been considered at first instance in a number of cases in Australia. In Jackson v John Fairfax & Sons Ltd [1981] 1 NSWLR 36, 41 Hunt J stated, following a concession by the defendants, that "to say that a person is suspected of something necessarily implies that he has so conducted himself as to have warranted that suspicion."

Hunt J reiterated this in Whelan v John Fairfax & Sons Ltd (1988) 12 NSWLR 148, 160, subject however to some qualification as a result of a decision of the New South Wales Court of Appeal in Sergi v Australian Broadcasting Commission [1983] 2 NSWLR 669. Hunt J said:

"In Sergi v Australian Broadcasting Commission, at p 677, Glass JA said that it was possible to accompany a statement of that suspicion with such a disavowal of its reasonableness as to leave the statement of suspicion standing without any suggestion that it was warranted. I agree that that is so, although such a line of reasoning to my mind clearly supports the proposition that a statement of such suspicion without more is at least capable of suggesting that the suspicion is warranted. I now accept that it does not necessarily convey that suggestion (as had been conceded in Jackson v John Fairfax & Sons Ltd [1981] 1 NSWLR 36). But it is obviously capable of conveying the suggestion that the plaintiff had so conducted himself as to have warranted that suspicion."

Mr Browne submitted that these authorities supported his contention. Mr Rampton invited us to disregard the Australian cases, in view of the attitude of the New South Wales Court of Appeal in Sergi's case.

However, that still leaves the important statements of Lord Reid and Lord Devlin in Lewis v Daily Telegraph Ltd [1964] AC 234, 260, 284 on which Mr Rampton himself relied in support of his general proposition that a defence of reasonable suspicion is valid. Both these passages seem clearly to suggest that the reason why a plea of reasonable suspicion is sustainable is because its sting is that the plaintiff has by his conduct brought suspicion upon himself. Hunt J's view is fully in line with this approach.

For these reasons I consider Mr Browne's submission is correct, and that it is an essential requisite of a defence of justification of reasonable suspicion that it should focus on some conduct on the plaintiff's part giving rise to reasonable suspicion.

I choose the word "focus" advisedly, in order to avoid any implication that such a defence must be exclusively confined to allegations of such conduct. Clearly it will be necessary, particularly in a complicated case like the present, for the defendant to portray in some detail the relevant background, and also to set out material which connects together the main facts relied upon.

The repetition rule

In Stern v Piper [1997] QB 123 the libel complained of consisted entirely of quotations from an affirmation prepared in connection with a pending High Court action for debt against the plaintiff, and the defendant's pleaded justification by reference exclusively to the statements in the affirmation and not the underlying facts. This court (Simon Brown LJ, Sir Ralph Gibson and myself struck out this defence on the ground that it infringed the repetition rule, which was described by Simon Brown LJ, at pp 135-136:

"The repetition rule . . . to a rule of law specifically designed to prevent a jury from deciding that a particular class of publication -- a publication which conveys rumour, hearsay, allegation, repetition, call it what one will -- is true or alternatively bears a lesser defamatory meaning that would attach to the original allegation itself. By definition, but for the rule, those findings would otherwise be open to the jury on the facts; why else the need for a rule of law in the first place?"

The judgments traced through in great detail the history of the repetition rule, dating back to the 1820s, thus showing how deeply embedded it is in our law of defamation. They also cited very important passages from the judgments of Lord Reid and Lord Devlin in Lewis v Daily Telegraph Ltd [1964] AC 234 differentiating rumour from suspicion.

Mr Browne submitted that the repetition rule is a rule of law which not only governs the assessment of the meaning of a publication complained of, but also limits both the permissible scope of the plea of justification of such a meaning, and the admissibility of evidence in support of such a plea.

Mr Rampton on the other hand submitted that the rule is simply and solely a rule of meaning and not one regulating either the scope of a plea of justification or the evidence admissible to support it. He accepted that, where, as in Stern v Piper [1997] QB 123 itself, the words complained of are confined simply and solely to the repetition of allegations made by a third party, the rule applies, but he went on to submit that, once the imputation is not so narrowly confined, the defendant is entitled to rely on any material, first- or second-hand, which would support such reasonable suspicion, including evidence which would otherwise be inadmissible. He illustrated this argument by submitting that, if he said that he suspected X was guilty because Y who is reliable told him so, he could prove what Y told him without calling Y or otherwise proving first-hand the truth of what he had been told.

In further support of this argument Mr Rampton cited a number of authorities dealing with the requirements of reasonable suspicion in wrongful arrest cases, as accurately summarised in Clerk & Lindsell on Torts, 17th ed (1995), p 808, para 16-101:

"Reasonable grounds for suspicion are not to be equated with prima facie proof of guilt, as the former may properly be based on matters which would not be admissible in evidence. The Court of Appeal disapproved any contention that reasonable grounds for suspicion must be based on 'a good deal more' then 'mere suspicion'. The test is simply whether in all the circumstances the objective information available to the constable supports reasonable grounds for suspicion, for conjecture or surmise of guilt. A direct charge made by a third party may be sufficient to justify arrest unless there are surrounding facts to show that the charge is unreasonable."

Mr Rampton also relied on the decision in Aspro Travel Ltd v Owners Abroad Group Plc [1996] 1 WLR 132, where the Court of Appeal (Stuart-Smith, Waite and Schiemann LJJ) considered a defence of justification in a libel action in which the defendants sought to prove that there were reasonable grounds for suspicion against the plaintiffs based in part on particulars citing hearsay and rumour. Giving the leading judgment with which Waite and Stuart-Smith LJJ agreed Schiemann LJ stated, at p 140:

"Mr Shields correctly submits that some of the particulars of justification are hearsay and rumour. It is manifestly dangerous to publish hearsay and rumour because in some circumstances the jury will accept that the true meaning of what was said was that the rumour is well founded. Mr Eady accepts that hearsay and rumour cannot constitute justification for an assertion of fact that the rumour was well founded and he does not seek to do so. However, he submits that there can be circumstances in which the existence of a rumour entitles a person to repeat that rumour even before he satisfies himself that the rumour is true and that in such circumstances it is possible to plead in justification that there were in truth such rumours. I agree in the abstract and do not regard it as appropriate to strike out the plea of justification on this basis. Striking out should only be done in clear and obvious cases."

Furthermore, although at the time of the hearing of this appeal it seemed, to judge from the law report, that Lewis v Daily Telegraph Ltd [1964] AC 234 had not been cited in Aspro Travel Ltd v Owners Abroad Group Plc [1996] 1 WLR 132, we have now ascertained that the contrary is the case, with the relevant passages being quoted in Mr Shield's skeleton argument.

This led Mr Browne to submit that the Aspro Travel case and Stern v Piper [1997] QB 123 are irreconcilable, and that we should prefer the latter.

I have come to the conclusion that the repetition rule applies in the manner described by Mr Browne for the reasons he gave. Contrary to Mr Rampton's argument, I am satisfied that it is a rule of law which governs not only meaning, but also the pleading and proof of a defence of justification. Stern v Piper is a very good illustration, since the ultimate decision was that the defence of justification should be struck out. Moreover, I consider that the repetition rule reflects a fundamental canon of legal policy in the law of defamation dating back nearly 170 years, that words must be interpreted, and the imputations they contain justified, by reference to the underlying allegations of fact and not merely by reliance upon some second-hand report or assertion of them.

I do not gain assistance from the wrongful arrest cases, since I think that the position of a police officer, who is carrying out a public duty and who may have to take action, frequently under pressure, on information which is at that stage incomplete is very different from that of a publisher of defamatory words who, save in special circumstances where a defence of qualified privilege is likely to be available, is under no compulsion to make any statement at all. I am not persuaded that the latitude rightly granted to the former in the difficult circumstances in which he operates in any way justifies the extension of a similar latitude to the latter in his very different environment.

I am, I must acknowledge, troubled by the Aspro Travel case [1996] 1 WLR 132, since I very much doubt whether Schiemann LJ's somewhat tentative view would have been the same if the court had given the appropriate weight to the authorities referred to in Stern v Piper [1997] QB 123, and, in particular to Lewis's case [1964] AC 234, including the well known dictum of Lord Devlin, at p 284: "For the purpose of the law of libel a hearsay statement is the same as a direct statement, and that is all there is to it."

I do not find it easy to reconcile Schiemann LJ's view with those citations, and I think the correct approach is to say that the Aspro Travel case should be confined to its own facts, and not treated as laying down a general principle.

One most salutary advantage of holding fast to the repetition rule is that it avoids lengthy investigation of the reliability of the makers of hearsay statements which might otherwise be admissible.

The present pleas of justification

The particulars of justification begin with a paragraph headed "Premises" which states:

"(a) That SCB had been the victim of a massive fraud in India in late 1991 and early 1992; and that a principal suspect was Bhupen Dalal. (b) That proceeds of the fraud could not readily be traced in India. (c) That it was therefore likely that the proceeds had been sent out of India via the 'hawala' banking system, and there 'laundered' and returned to Dalal and his associates in an untraceable form such as Indian Development Bonds (IDBs) and Non-Resident Indian deposits (NRIs)."

It then proceeds to set out five separate grounds each of which is supported by a number of particulars. Ground 1 states: "The plaintiffs are long-standing personal friends and business associates of Bhupen Dalal and his colleagues" Ground 2 states: "The plaintiffs, and Mount Bank, are not reputable bankers; the covert manner in which they do business renders them likely participants in hawala and money laundering transactions". I shall return to these two grounds later.

Ground 3, which is the central allegation, is:

"The plaintiffs and Mount Bank were in fact involved, jointly with Bhupen Dalal and his company CIFCO in the purchase of large amounts of untraceable NRI and IDB bearer bonds in the Gulf in early 1992, just at the time when the proceeds of the fraud on SCB would require 'laundering.'

"3.1 In early 1992, BD was engaged in setting up a new branch of his company CIFCO in Sharjah, its principal activity to be dealing in IDBs and other securities for non-resident Indian investors.

"3.2 At the same time, the first plaintiff (on behalf of Mount Bank and the second plaintiff) visited the Gulf, and approached ANZ Grindlays Bank Dubai with a proposal that they should jointly purchase a large quantity of IDB's. Mount did in fact purchase at least US$115m of IDBs via ANZ Grindlays Bank Dubai.

"3.3 As above pleaded, Mount Bank did in January 1992 buy a very large quantity of IDBs, well in excess of its Bank of England limits, and forming a very high proportion of its overall assets.

"3.4 On 18 March 1992, Mount Bank requested the State Bank of India to deliver all the said IDB's (purchased in three separate tranches, in Oman, Dubai and India) to CIFCO in Bombay.

"3.5 These transactions are entirely consistent with a hawala deal whereby BD furnishes stolen money to the plaintiffs or their associates in India, and they in turn purchase IDB's abroad in (relatively) small lots so as not to attract suspicion, and then return them to CIFCO in India under the pretence that CIFCO is holding them on behalf of clients of Mount or of itself.

"3.6 In May 1992, Mr Patel of John Cumming & Partners visited Dubai, and then the Isle of Man, where many of BD's and CIFCO's assets are held."

Ground 4 contains a number of items of hearsay information allegedly gleaned from third parties. Ground 5 relies on matters subsequent to publication, and is not now defended by Mr Rampton for the obvious reason that it is very difficult to see how subsequent events could be a sound basis for reasonable suspicion.

Ground 3 in my judgment plainly meets the conduct requirement and must be allowed to stand. Ground 4, however, plainly infringes the repetition rule, and should therefore be struck out in its entirety, together with ground 5.

I now return to grounds 1 and 2, where Mr Browne raised a number of detailed objections.

Mr Browne objected to the premises, on the ground that they are neither a meaning sought to be justified nor particulars of facts by which the meaning will be shown to be true, and also on the basis that they are inadequately particularised. In my judgment the premises are properly pleaded as background, which it will be incumbent on the defendant to prove by reference to the particulars in the ensuing grounds.

Ground 1, which is supported by several detailed particulars of business links between the plaintiffs and BD, is objected to on the grounds that friendship and association is irrelevant since it proves nothing. I disagree and consider that this also is properly relied upon as part of the relevant background.

So far as ground 2 is concerned, I can see no objection to the second part of the sentence "the covert manner . . ." which is supported by a number of particulars of alleged conduct on the plaintiffs' and Mount's part which to my mind is legitimate background.

On the other hand I do think Mr Browne has a valid objection to the first few words alleging that the plaintiffs and Mount are not reputable bankers, since the plea of justification, for the reasons I have already given, must be aimed at the plaintiffs' conduct and not at their antecedent reputation. I would therefore strike out those words.

Conclusion

It follows that the plaintiff's appeal under Ord 82, r 3A fails save in respect of the defendant's meaning (iii). The defendant's attack on the plaintiffs' meanings equally fails, save in respect of meaning (5) of the Reed slander and libel.

The attack on the defendant's plea of justification succeeds in relation to grounds 4 and 5, but otherwise fails apart from the minor adjustments to which I have just referred.

It follows that the appeal succeeds only to the extent identified above, and the rival applications for leave to amend succeed save to the extent that I have already mentioned.

By way of postscript, I would like to add that, at the pre-trial review which will certainly be necessary in this case, it should be a matter for careful consideration whether it would be appropriate to follow or at least adapt the practice successfully pioneered by Popplewell J in Marks & Spencer Plc v Granada Television Ltd (unreported), 23 February 1998, whereby the issue as to the true meaning of the words was decided in advance, and, having been resolved in the plaintiff's favour, averted several weeks of trial on the plea of justification which depended on the defendant's meaning which the jury rejected. In the present case, if the fundamental conflict on meaning were to be resolved in the plaintiffs' favour, there would be little if anything left of the plea of justification, and the trial would then proceed on the issues of qualified privilege and malice, with a very great saving of time.


May LJ: I entirely agree with the judgment of Hirst LJ. I agree in particular that the publications which are the main subject of these proceedings are capable of meanings to the short effect that there were reasonable grounds to suspect that the plaintiffs had been involved in money laundering. This short additional judgment deals only with the application of the repetition rule when a defendant seeks to justify meanings of this kind.

Grounds 4 and 5 of the defendant's particulars of justification allege that the defendant and its investigators had received credible allegations indicating that the plaintiffs were or might be involved in laundering the fraud proceeds of Bhupen Dalal. It is the plaintiffs' case that these particulars should be struck out. The defendant says that they are permissible.

A publication that a person is guilty of something differs from a publication that there are reasonable grounds to suspect that he is guilty. Each is normally capable of being defamatory. The second will usually be less serious than the first. To justify the first publication, you have to establish that the person is guilty. To justify the second publication, you have to establish that there are objectively reasonable grounds for suspicion.

The repetition rule in its simplest application is that, if you publish a statement that Y said that X is guilty, it is not a defence to an action for defamation to establish the literal truth of the publication, ie that it is indeed true that Y said that X is guilty. You are repeating and endorsing Y's publication and your justification must address the substance of what Y said, not the fact that he said it. The obvious underlying reason for the rule is that statements of this kind in substance restate the original publication it is not, I think, helpful to suggest, as did Mr Rampton, that the rule operates as a blue pencil. It is rather a rule which encapsulates the fact that publications of the bald kind under consideration do in substance amount to a republication of the reported publication and that that is their meaning. The rule in its simplest application thus addresses what it is that a defendant has to justify. As Simon Brown LJ said in Stern v Piper [1997] QB 123, 135-136:

"The repetition rule (I gratefully adopt Hirst LJ's term for it . . .) is a rule of law specifically designed to prevent a jury from deciding that a particular class of publication -- a publication which conveys rumour, hearsay, allegation, repetition, call it what you will -- is true or alternatively bears a lesser defamatory meaning than would attach to the original allegation itself. By definition but for the rule, those findings would otherwise be open to the jury on the facts; why else the need for a rule of law in the first place? Take the present case. If, as I would hold, the rule applies it applies to prevent the defendants from pleading and then inviting the jury to conclude that their article is true because it does no more than recite what in fact is alleged in Mr Gorman's affirmation, alternatively is less defamatory than Mr Gorman's affirmation itself (which, of course, attracts absolute privilege) because it does not assert the truth of the affirmation but merely reports that it contains such allegations . . . The policy underlying and justifying the rule is that stated by Lord Reid in Lewis v Daily Telegraph Ltd [1964] AC 234, 260: 'I can well understand that if you say there is a rumour that X is guilty you can only justify it by proving that he is guilty, because repeating someone else's libellous statement is just as bad as making the statement directly.'"

Simon Brown LJ also said, at p 138:

"As, however, Hirst LJ has shown in the passages he cites from the various speeches (including Lord Devlin's), so far from Lewis's case undermining the repetition rule, it in fact reiterates it. And, as I began by pointing out, the repetition rule is indeed a rule which, where it applies, dictates the meaning to be given to the words used. Had Mr Gorman's affirmation alleged, not that the appellant is guilty of dishonesty and perjury, but only that he is suspected of such misconduct, then Lewis's case would be in point: the defendants on repeating such lesser allegation would then have to prove merely grounds for suspicion and not actual guilt."

Hirst LJ carried out a full analysis of the repetition rule and the authorities underlying it in Stern v Piper [1997] QB 123. The rule goes back to the early 19th century and was followed and applied in Watkin v Hall (1868) LR 3 QB 396. Hirst LJ said, at p 134, that it was:

"very important to appreciate the weight of authority behind the repetition rule, which was well established throughout most of the 19th century, which was given unqualified endorsement as settled law by the Privy Council in 'Truth' (NZ) Ltd v Holloway [1960] 1 WLR 997, and which gained the final seal of approval from the House of Lords in Lewis v Daily Telegraph Ltd [1964] AC 234."

In Stern v Piper [1997] QB 123 it was held that the repetition rule applied to the publication of defamatory material which quoted from an affirmation prepared in connection with a pending High Court action for debt against the plaintiff. It is relevant to note that leading counsel for the defendants in Stern v Piper was Mr David Eady QC.

Mr Rampton accepts that the repetition rule applies to cases where there is a mere repetition of a defamatory statement made by another person. But he submits that, where the meaning of the publication is, not that a person is guilty, but that there are reasonable grounds to suspect that he is guilty and where the defendant wants to justify that meaning, it is permissible to call evidence of what the defendant was told, not to prove the truth of what was said, but to prove the fact that it was said. He submits that reasonable grounds for suspicion may in appropriate circumstances be established by such evidence, since reasonable grounds for suspicion may derive from what you are told by people whom you know to be reliable. Thus, he submits, publications of this kind may be justified by evidence such as "I have reasonable grounds to suspect that X is guilty, because Y told me that X is guilty and because I know that Y is honest and reliable." The submission did not address a secondary question of the basis for the informant's supposedly reliable information. Y might claim to know that X is guilty because he had personally seen the relevant acts, or alternatively he might himself simply be passing on information which he had himself been told by someone else.

Mr Rampton relied on a passage in the opinion of Lord Hodson in Lewis v Daily Telegraph Ltd [1964] AC 234, 274-275 where Lord Hodson drew a distinction between rumour and suspicion, and to an equivalent passage in the opinion of Lord Devlin, at p 282. But these passages were, I think, directed to the distinction between the publication alleging guilt and a publication alleging reasonable grounds to suspect guilt. The fact that the unvarnished repetition of a rumour falls into the first of those categories and requires proof of actual guilt does not mean that a publication in the second category may be justified by proof of rumour.

It is evident that Mr Rampton's submission has moved from addressing a simple application of the repetition rule, which concerns the nature of the defamatory publication and what has to be justified to the rather different question of what matters may be relied on and what evidence may be called where a defendant wants to justify a defamatory publication to the effect that there are reasonable grounds for suspicion. Is it permissible to rely on what you have been told by someone else and, as Mr Rampton suggests, to bolster the credibility of the hearsay information by asserting that your informant is reliable?

Mr Rampton referred to and relied on a passage in the judgment of Schiemann LJ in Aspro Travel Ltd v Owners Abroad Group Plc [1996] 1 WLR 132. Representatives of the defendants published defamatory statements to the effect that the plaintiff companies were about to become bankrupt or that there were reliable rumours to that effect. The defendants denied that the words were defamatory, but pleaded that, in so far as they were, they were justified. They relied on the existence of hearsay and rumour. The plaintiffs applied to strike out these particulars. Schiemann LJ said, at p 140:

"Mr Shields correctly submits that some of the particulars of justification are hearsay and rumour. It is manifestly dangerous to publish hearsay and rumour because in some circumstances the jury will accept that the true meaning of what was said was that the rumour is well founded. Mr Eady accepts that hearsay and rumour cannot constitute justification for an assertion of fact that the rumour was well founded and he does not seek to do so. However, he submits that there can be circumstances in which the existence of a rumour entitles a person to repeat that rumour even before he satisfies himself that the rumour is true and that in such circumstances it is possible to plead in justification that there were in truth such rumours. I agree in the abstract and do not regard it as appropriate to strike out the plea of justification on this basis. Striking out should only be done in clear and obvious cases."

There are no doubt circumstances in which the existence of a rumour entitles a person to repeat that rumour even before he satisfies himself that the rumour is true. One such circumstance mentioned during submissions in this appeal might be where a broker passes on to his client a rumour in the market so that the client may decide whether to act upon it. Publications of this kind will be legitimate in so far as they are the subject of qualified privilege. But on the face of it the publication of such a rumour should be subject to the repetition rule and it is not easy to see in what circumstances publications of this kind might be justified by establishing that there were in truth such rumours. The repetition rule and the authorities upon which it is based were not referred to in the Aspro Travel judgment and it is odd that Mr Eady, with whose submission Schiemann LJ agreed in the abstract, did not rely on the Aspro Travel case in his submissions in Stern v Piper [1997] QB 123. In so far as it may be suggested that Stern v Piper and the Aspro Travel case do not sit happily together, I prefer Stern v Piper not least because it is a case which considers all the main authorities on the repetition rule.

It nevertheless remains to consider whether, if the meaning which the defendants wants to justify is that there are reasonable grounds for suspicion, it is permissible to rely on what you have been told by someone else. In my judgment, it is not. I maintain the view which I expressed at first instance in Hinduja v Asia TV Ltd (unreported), 1 October 1996. In that case, the defendants wanted to justify a meaning of a defamatory publication to the effect that there were credible grounds for suspecting that the plaintiffs had been involved in an Indian bribery scandal. The particulars of justification consisted mainly of repetition of hearsay statements, many of them from newspaper articles, with unsubstantiated assertions that in all the circumstances the reported statements were credible. There were 25 or more paragraphs of such material and I held that the particulars of justification should be struck out in their entirety, giving the defendants the opportunity to replead particulars which did not rely on reported material asserted to be credible. In doing so, I said:

"But at this pleading stage it is in my view clear that the defendants' justification has to address as a minimum the inherent credibility of the underlying facts alleged to link the plaintiffs with the scandal. What others, least of all newspapers, have said about those facts does not advance their inherent credibility. Nor does bald assertion of credibility."

The facts of Hinduja's case well illustrate problems which in my view Mr Rampton's submission cannot overcome. If a defendant wishing to justify a publication to the effect that there are reasonable grounds to suspect the plaintiff of discreditable conduct can rely on what he has been told by persons whom he regards as honest and reliable, it must follow that evidence would be admissible as to the reputed honesty and reliability of the defendant's informants. The practical problems which that might cause in a case such as Hinduja's case are obvious. In principle, however, evidence of this kind would be objectionable because it would introduce irrelevant considerations in purported proof of what the defendant has to establish. The defendant has to establish that there are objectively reasonable grounds to suspect the plaintiff. The evidence under consideration would be directed rather to an essentially subjective judgment of the honesty and credibility of third parties. In human terms, anyone is entitled to believe what third parties tell them. But such belief does not establish that what is reported is objectively credible.

I agree with Hirst LJ that there is no analogy between the subject under discussion in defamation and what constitutes a defence of reasonable grounds for suspicion in cases against police officers for unlawful arrest or malicious prosecution.

In my view, a proper balance between freedom of speech and protection of reputation is achieved by rejecting Mr Rampton's submission. Those who publish without malice defamatory statements to the effect that there are reasonable grounds to suspect a plaintiff of discreditable conduct are protected if the occasion is privileged. If the occasion is not privileged, they may justify the publication by proving objectively that there are such reasonable grounds. Allegedly credible hearsay may not contribute to such proof Defendants will have to call their informants or provide other direct evidence. If this is in individual cases difficult, that only emphasises that reputation should not be put at risk by publication on occasions which are not privileged of unsubstantiated hearsay. In the end, the argument turns, not so much on the repetition rule, as on the admissibility, probative value and relevance of hearsay evidence.

For these reasons I respectfully agree with the orders which Hirst LJ proposes.

Sir Brian Neill: I have had the advantage of reading the judgments of Hirst and May LJJ in draft and I agree with them and with the orders proposed by Hirst LJ. There is nothing that I can usefully add.


Appeal allowed as per judgment.
No order as to costs on amendment.
Plaintiffs to have half their costs in Court of Appeal and in court below.
Leave to appeal refused.

Solicitors: Peter Carter-Ruck Partners; Herbert Smith.

[Reported by John Spencer Esq., Barrister]

The following cases are referred to in the judgments:

Aspro Travel Ltd v Owners Abroad Group Plc. [1996] 1 WLR 132; [1995] 4 All ER 728, C.A.
Evans v Granada Television Ltd [1996] E.M.L.R. 429, C.A.
Hinduja v Asia T.V Ltd (unreported), 1 October 1996, May J.
Jackson v John Fairfax Sons Ltd [1981] 1 N.S.WLR 36
Lewis v Daily Telegraph Ltd [1964] AC 234; [1963] 2 WLR 1063; [1963] 2 All ER 151, H.L.(E.)
Marks Spencer Plc. v Granada Television Ltd (unreported), 23 February 1998, Popplewell J.
Sergi v Australian Broadcasting Commission [1983] 2 N.S.WLR 669
Shah v Governor and Company of the Bank of England [1994] 3 Bank.L.R. 205
Stern v Piper [1997] QB 123; [1996] 3 WLR 715; [1996] 3 All ER 385, C.A.
Watkin v Hall (1868) L.R. 3 QB 396
Whelan v John Fairfax Sons Ltd (1988) 12 N.S.WLR 148

The following additional cases were cited in argument:

Bennett v Guardian Newspapers Ltd [1997] E.M.L.R. 301
Bookbinder v Tebbit [1989] 1 WLR 640; [1989] 1 All ER 1169, C.A.
Bower v Maxwell (unreported), 8 May 1989; Court of Appeal (Civil Division) Transcript No. 472 of 1989, C.A.
Broadcasting Corporation of New Zealand v Crush [1988] 2 N.Z.L.R. 234
Capital and Counties Bank Ltd v George Henty Sons (1882) 7 App.Cas. 741, H.L.(E.)
Cassidy v Daily Mirror Newspapers Ltd [1929] 2 KB 331, C.A.
Cohen v Daily Telegraph Ltd [1968] 1 WLR 916; [1968] 2 All ER 407, C.A.
Dingle v Associated Newspapers Ltd [1964] AC 371; [1962] 3 WLR 229; [1962] 2 All ER 737, H.L.(E.)
English and Scottish Co-operative Properties Mortgage and Investment Society Ltd v Odhams Press Ltd [1940] 1 KB 440; [1940] 1 All ER 1, C.A.
Hussien v Chong Fook Kam [1970] AC 942; [1970] 2 WLR 441; [1969] 3 All ER 1626, P.C.
McDonald's Corporation v Steel [1995] 3 All ER 615, C.A.
Mapp v News Group Newspapers Ltd [1998] QB 520; [1998] 2 WLR 260, C.A.
Scott v Sampson (1882) 8 QBD. 491, D.C.
Simmons v Mitchell (1880) 6 App.Cas. 156, P.C.
Skuse v Granada Television Ltd [1994] 1 WLR 1156
Venables v Bose (unreported), 10 November 1997; Court of Appeal (Civil Division) Transcript No. 1799 of 1997, C.A.
Waters v Sunday Pictorial Newspapers Ltd [1961] 1 WLR 967; [1961] 2 All ER 758, C.A.

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