High Court discharges undertaking in Babco Chemicals fraud case against HSBC

The High Court's recent judgement in Babco Chemicals Inc v HSBC UK Bank Plc demonstrates the court's willingness to balance procedural restrictions with the pursuit of substantive justice in fraud cases. His Honour Judge Pearce, sitting in the High Court of Justice on 9 July 2025, granted Babco Chemicals' application to discharge a restrictive undertaking, enabling the claimant to pursue broader claims against HSBC UK Bank Plc.

The case centred on an undertaking given by Babco Chemicals on 22 May 2024, which prevented the company from using documents or information obtained from HSBC without prior court permission. This restriction arose in the context of Babco's allegations of push payment fraud, where the claimant asserted it had been defrauded of funds subsequently transferred into an HSBC account.

Babco's application sought to discharge the undertaking, arguing it was entitled to pursue claims beyond mere tracing of the alleged fraud proceeds. The claimant maintained that its intended use of the acquired information did not breach the original undertaking and that broader investigative powers were necessary to substantiate its claims against HSBC.

The defendant's position proved somewhat reluctant, arguing that the application should have been made earlier. However, HSBC's neutral stance on certain components of the application streamlined proceedings, eliminating the need for extensive submissions from either party. The judge acknowledged the urgency of the situation, noting Babco's requirement to comply with stakeholder proceedings by 14 July 2025.

Judge Pearce's analysis examined whether the application was essential and whether sufficient reason existed for a cautious approach regarding the undertaking. The judgement referenced established precedent from Birch v Birch, emphasising the court's discretion regarding undertakings and the importance of circumstantial change when considering variations.

The judge recognised the substantial nature of Babco's intended claims, which ranged from damages to allegations of conspiracy. Critically, the court found that imposing restrictions preventing the claimant from pursuing potential claims of impropriety would likely undermine the objective of ensuring justice. If Babco could substantiate its allegations against HSBC as indicated in its draft particulars of claim, the absence of fraud or impropriety on the claimant's part suggested the undertaking could and should be varied.

The discharge was granted conditionally, with Babco required to confirm it would abide by a more limited variation restricting use of obtained material to purposes related to its current claims. This approach maintains appropriate safeguards whilst permitting the claimant to pursue its case effectively.

Regarding costs, the judge declined to award them to either party. The application arose from Babco's desire to clarify implications of previous document disclosures, and the court determined that costs were not appropriate in these circumstances.

The judgement represents a significant development in the ongoing litigation surrounding the alleged fraud. It illustrates the courts' careful balancing act between permitting claimants the opportunity to pursue justice whilst ensuring that prior legal frameworks, including undertakings, are appropriately acknowledged and adhered to.

This decision may prove influential in future cases involving restrictive undertakings in fraud proceedings. The court's approach demonstrates a pragmatic willingness to vary procedural restrictions where doing so serves the interests of justice, particularly in complex commercial fraud cases where the scope of wrongdoing may only become apparent through investigation.

The case underscores the importance of timing and justification when seeking to vary or discharge court-imposed restrictions, whilst confirming that such restrictions should not unduly prevent legitimate claims from being pursued where appropriate safeguards can be maintained.