England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 May 2008

Section I: Overview	1
Introduction	1
The investment claims	4
The general advisory claims	4
The misrepresentation claims	5
Causation and damage in respect of the Investment Claims	7
The Excess Profit Claim	8
The Shipping Losses Claim	9
The Post-Default Note Claims	10
The Custody Fees Claim	11
Interest	12
Procedural Chronology	14
The relevant parties	17
Chase Entities	17
The Polemis Group and the Polemis family	21
The Key Issues	32
Section II: General advisory claim ? Issue 1.1: Did Chase owe a contractual and/or tortious duty of care to Springwell to advise it as to appropriate investments?	33
Relevant Key Issues	33
Springwell's case as to the existence of an advisory obligation: contract	34
Springwell's case as to the existence of an advisory obligation: tort	35
The shift in focus of Springwell's case	39
The extent of the duties of care alleged against Chase	41
The legal approach to the determination as to whether an advisory duty existed	44
The ambit of the factual inquiry	55
Credibility of AP as a witness	63
Credibility of JA as a witness	68
Features of the relationship between the Polemis Group and Chase in the period 1974-1986	73
The evidence relating to the introduction of JA to Springwell in December 1987 or March 1988 and to the early trading period from 1987-1990	81
The introduction of AP to JA	81
Conclusion as to whether CMB or CIBL owed the alleged duties of care as a result of the circumstances surrounding the introduction of JA to AP	93
The evidence relating to the period 1990 to April 1994, when EM left Chase	132
The move of Springwell's account to the Private Bank	134
The wholesale counterparty regime	137
The growth of emerging markets trading in the 1990s	141
JA's move to IFI, and the early expansion of Springwell's portfolio into emerging market investments	144
Springwell's early IMAs	166
Petrobras and the introduction of leverage to Springwell's portfolio	169
The increase in the amount of the Investment Grade Facility	181
Confirmations under the Investment Grade Facility	191
The introduction of the Margin Forward Programme and the Margin Forward Agreement	193
The terms of Springwell's MFA and MFA confirms and the circumstances in which they were signed	208
The DDCS Letters	221
The early expansion of Springwell's portfolio of emerging markets investments	236
Growth of Springwell's portfolio and increases in leverage	242
Principal factual findings in respect of the relationship between the Private Bank and Springwell during EM's time as relationship manager at the Private Bank (1990- 1994)	261
The evidence relating to the period 1994 to 17 August 1998, the date of the Russian default	270
EM leaves the Private Bank in 1994	271
The Tequila Crisis	275
Springwell's dealings with Merrill Lynch	280
The build up of Springwell's Russian Portfolio	287
Investments in Russia available to the international capital markets in the 1990s	300
Springwell's investments in GKO-linked notes	302
The relevant terms of the GKO documentation	319
The circumstances in which the GKO-linked Note documentation was signed	324
Restructured debt of the former Soviet Union: Prins and IANs	328
New Russian dollar-denominated debt instruments ? sovereign debt	334
New Russian dollar-denominated debt instruments ? sub-sovereign and corporate bonds	337
Springwell's Indonesian investments and the Asian crisis	340
The Global Investor Service Account Agreement	343
The repo programme and the GMRA	344
Springwell's case in respect of the period 1994 ? 1998	355
The conduct or role of JA in the period 1990-1998	357
The role of the Private Bank: 1994-1998	377
Use of the term "advice" and "trusted financial advisor"	380
Grupo Synkro	390
Attempts by Chase to persuade Springwell to diversify during the period after March 1996	404
Conclusion in relation to Key Issue 1.1 in relation to the period 1990-1998	430
The sophistication of AP/Springwell as an investor	432
The absence of an advisory agreement	435
The presence or absence of the indicia of an advisory relationship	442
The actual role played by JA over the relevant period 1990-1998, and AP's reliance upon JA	446
The actual role of the Private Bank, over the relevant period 1990-1998 and AP's reliance upon the Private Bank	461
The terms of the relevant contractual documents and disclaimers: their general effect	475
Springwell's arguments seeking to avoid the terms of the relevant contractual documents and disclaimers	492
The terms of the relevant contractual documents and disclaimers: the construction of particular clauses	495
Specific construction points on the MFA	498
Specific construction points on the 1993 and 1997 DDCS letters	503
Specific construction points on the GMRA	526
Specific construction points on the GKO-Linked Notes Documentation	532
Can Springwell avoid the apparent effect of the Relevant Provisions because they were allegedly inconsistent with the existing advisory relationship between Chase and Springwell?	537
Can Springwell avoid the apparent effect of the Relevant Provisions on other grounds?	570
Breach of fiduciary duty	572
Interfoto v Stiletto	579
Misrepresentation	590
Unilateral Mistake	593
Estoppel by convention and representation	596
The Unfair Contract Terms Act 1997/the Misrepresentation Act 1967	598
Conclusions on issues 1.1, paragraphs 2-4	609
If Chase did owe any duty, what was the ambit of any duties owed?	610
Section III: General Advisory Claim ? Issue 1.2: Breach	619
Section IV: General Advisory Claim ? Issue 1.3: Causation	635
Section V: General Advisory Claim ? Issue 1.4: Quantum	648
Section VI: General Advisory Claim ? Issue 1.5: Contributory Negligence	650
Section VII: Misrepresentation ? Issues 2.1 ? 2.2	656
Introduction	656
The general misrepresentation claim	662
The specific misrepresentation claims	664
The Relevant Provisions	666
Trading Opinion	677
Remaining issues in relation to the misrepresentation claims	679
Alleged misrepresentations as to Russia and the state of the Russian economy	681
Alleged misrepresentations about the GKO-Linked Notes	705
Alleged misrepresentations about Russian Banks	713
Representations about the Ukraine Note	716
Conclusion on the misrepresentation claim	724
Section VIII: Breach of fiduciary duty claim ? Issues 3.1 ? 3.4	725
Summary of the breach of fiduciary duty claims	725
The allegation that Chase deliberately did not "control" JA's dealings with Springwell because Springwell was a very profitable client etc.	730
The third allegation, namely that CMB, CIBL and/or CMIL made excessive and unusually large profits at Springwell's expense from their dealings	732
Conclusion on the alleged breach of fiduciary duty claim	738
Section IX: Post-default Claims: Issues 4.1 to 4.2.3	739
Section X: Conclusion	740

Mrs Justice Gloster:

Section I: Overview

Introduction

1. Springwell Navigation Corporation ("Springwell"), the effective claimant in these proceedings, was, at all material times for the purpose of this litigation, the investment vehicle of the Polemis family, who owned and operated a large Greek shipping fleet. By its counterclaim, Springwell makes various claims against a number of companies within the JP Morgan Chase Group (collectively, and individually, where precise designation does not matter, referred to as "Chase"), in respect of mark to market losses which arose on Springwell's emerging markets investment portfolio following the Russian financial crisis, and default by the Russian State on certain of its financial obligations, in August 1998. Springwell also makes claims against Chase in respect of events which occurred after the Russian default.
2. During the 1990s, Springwell had invested very heavily in emerging markets, acquiring, through Chase, a portfolio of debt instruments with a face value of over United States dollars ("$" or "dollars") 700 million. In particular, during 1997 and 1998, Springwell had built up substantial investments in Russian bonds or instruments referenced to Russian bonds in the nature of treasury bills. These instruments included instruments referred to as "GKO-Linked Notes", which were short-term structured (i.e. derivative) instruments, issued by one of the Chase entities. These GKO Linked Notes were referenced to underlying short-term, non-interest-bearing bonds, denominated in roubles, quoted at a discount to face value, and issued by the Russian Federation, which were known as "GKOs", an acronym for their full Russian name, Gosudarstvenniye Kratkosrochniye Beskuponniye Obligatsio. The GKO-Linked Notes embedded forward contracts for the conversion of the GKO rouble proceeds into dollars. Springwell had invested very profitably in GKO-Linked Notes since April 1996. However, as part of the measures imposed in Russia during the crisis, the referenced GKOs on Springwell's outstanding GKO-Linked Notes defaulted and were restructured. Springwell's other investments, not only in Russia, but also in other states of the former Soviet Union and Indonesia, were also heavily marked down in the aftermath of the crisis.
3. Springwell's claims, as maintained at the conclusion of the trial, may be summarised as follows.

The investment claims

4. First, Springwell claims damages or equitable compensation for breach of contract, negligence, breach of fiduciary duty, negligent mis-statement and/or under section 2 of the Misrepresentation Act 1967 in respect of the loss of the value of the investment portfolio acquired through its dealings with Chase. These claims were referred to by the parties as "the Investment Claims".

(i) The general advisory claims

The first category of Investment Claims are based upon an alleged advisory relationship between Chase and Springwell, which, Springwell contends, imposed an obligation upon Chase to advise Springwell as to what investments were appropriate for Springwell, having regard both to the particular characteristics of individual investments and the balance of the portfolio as a whole. The thrust of Springwell's complaint is that the portfolio of emerging markets investments, which it held as at 17 August 1998, was one which no reasonable advisor could have advised Springwell to have held. Springwell contends^[1] that, if Chase had acted in accordance with its contractual, tortious and fiduciary duties, then, in August 1998, Springwell would not have held the portfolio it in fact held. Instead, it contends, Springwell would have held a portfolio which was well-diversified, predominantly in liquid and low-risk investments, and structured in such a way that there would have been no appreciable risk that the capital value of individual investments, or the portfolio as a whole, would be substantially reduced (for example, by having to sell into a falling market). It contends that Springwell's portfolio would have included time deposits and/or gilts, T-bonds, and other blue chip bonds, together with other fixed-income investments, possibly including emerging markets investments, and managed funds; all of which would have been held variously for income, liquidity and capital preservation. It further contends that, if the appropriate advice had been given, the portfolio would not have been leveraged^[2] to such an extent that Springwell could be exposed to substantial margin calls or would have been forced to sell into a falling market. In such circumstances the Russian and Asian financial crises would have had no, or no substantial, effect on the value of Springwell's holdings and/or they would not have caused any or any substantial loss to Springwell, because it would not have been required to sell any holdings to produce cash. Springwell complains that, in fact, because of Chase's breaches of duty, as a result of the Russian financial crisis:

i) Springwell's portfolio collapsed in value after August 1998;

ii) Springwell had no cash inflow from the GKO-linked Notes on their due dates;

iii) Springwell was unable to transfer cash into the Polemis shipping business; and

iv) Springwell had very substantial liabilities in respect of borrowings from Chase, and had no option but to enter into a term loan ("the 1999 Term Loan") with Chase on 15 January 1999 in order to pay off those liabilities.

5. In order to avoid the potential consequences of certain disclaimers in the contractual documentation between it and Chase, Springwell contends that the existence of a duty to advise, allegedly assumed in 1986 or 1987, and the advice actually given and relied upon for the 5 years thereafter, and, indeed, subsequently, prevents Chase from relying upon such disclaimers (even if they apply as a matter of construction), since the disclaimers only date from 1992. Springwell also contends that the existence of a fiduciary relationship between it and Chase also prevents any such reliance by Chase.

(ii) The misrepresentation claims

6. In relation to the second category of Investment Claims, Springwell contends that, even on the assumption that Chase had no responsibility to give general investment advice to Springwell, Chase is nonetheless liable for negligent misstatement, or under section 2 of the Misrepresentation Act 1967, for having mislead Springwell inter alia as to the characteristics of the GKO-linked Notes and other Russian investments. Springwell contends that, as a direct result of what Chase told it, it regarded such notes as conservative, cash-equivalents. It also in this context seeks to circumvent certain disclaimers in the contractual documentation between it and Chase.

Causation and damage in respect of the Investment Claims

7. Springwell's case on causation and damage in respect of its investment losses is that the Russian default massively reduced the value of Springwell's investments and threw the portfolio into negative equity, and as a result, Springwell had to enter into the 1999 Term Loan with Chase on 15 January 1999. Springwell claims damages calculated by reference to the value of its investments as at that date, as compared with the portfolio it says that should have had as at that date, had Chase advised it properly. It contends that any later increases in the value of any of the investments which Springwell retained, are irrelevant in the light of legal authority.

The Excess Profit Claim

8. Second, Springwell claims an account of, and equitable compensation for, what it contends were excessive profits made by Chase from its dealings with Springwell ("the Excess Profit Claim").

The Shipping Losses Claim

9. Third, Springwell claims damages consequential upon its investment claims in respect of the loss of profits from new vessels which would have been acquired if the value of the investment portfolio had not been lost ("the Shipping Losses Claim"). It contends that the Shipping Losses Claim is a foreseeable consequence of the matters giving rise to the investment claims, and, in a sense, is an alternative to the usual claim for interest. Springwell claims that the loss of the use of the investment funds, which should have been in its portfolio, is not represented by an interest rate, but rather by the profits which those funds would have produced through the purchase of new ships. It contends that Chase knew that that was one of the most typical uses to which any surplus funds Springwell had would be put and that Chase knew it to be Springwell's intention so to apply such funds.

The Post-Default Note Claims

10. Fourth, Springwell makes certain claims in respect of Chase's alleged conduct after the Russian default ("the Post-Default Note Claims"). These are:

i) a claim for the $ Redemption Amounts in respect of 11 GKO-Linked Notes, which did not perform ("the Failed Notes") and in which Springwell had invested at the date of the Russian default; this is on the alleged basis that, because Chase failed to exercise options available to it under the terms of the Notes, the Redemption Amounts are due;

ii) in the alternative, a claim for an account of sums received in respect of transactions referred to in those Notes;

iii) also in the alternative, a claim for damages in respect of the failure of Chase to secure value from transactions referred to in those Notes;

Springwell claims that Chase must account and/or pay damages in relation to the way in which it sought, or did not seek, to obtain value from forward currency transactions related to the Notes and that Chase wrongfully preferred the interests of its Russian subsidiary, to those of its customer Springwell; in particular, Springwell complains of Chase's decision to declare force majeure in relation to certain forward contracts with its Russian subsidiary.

The Custody Fees Claim

11. Fifth, Springwell claims reimbursement or damages in respect of custody fees allegedly wrongly charged by Chase after April 2000 ("the Custody Fees Claim").

Interest

12. Sixth, Springwell claims interest on all sums for which Chase is found liable and/or on all sums found due. It accepts that, in order to avoid double counting, if the shipping losses claim were to succeed, then allowance would have to be made in the calculation of interest on the investment claims to reflect the fact that Springwell's money would have been used to finance the purchase of the relevant vessels.
13. The claims described at paragraphs 4 to 9 above were referred to at trial as the "Pre-Default Claims", since they concern acts or omissions occurring before 17 August 1998, the date of the Russian default. The claims described at paragraphs 10 and 11 above were referred to at trial as the "Post-Default Claims".

Procedural Chronology

14. Springwell's complaint against Chase was first brought in December 1999, in proceedings in the United States. It was formulated as a claim for several hundred million dollars on the grounds of fraud and allegedly negligent advice in connection with Springwell's investment, through Chase, in emerging market debt securities. It included the allegation that Chase had acted dishonestly in selling investments to Springwell which it knew to be unsuitable. The claim was dismissed on jurisdictional grounds, and all appeals were refused.
15. On 9 April 2001 Chase issued its claim form in this Court against Springwell, seeking a declaration that it had no liability to Springwell in respect of any of the relevant transactions. Springwell counterclaimed for damages and compensation arising out of Chase's alleged failure properly to advise it in relation to its emerging market investments. The counterclaim also included the allegation that, for about a year, Chase had acted dishonestly in mis-selling Springwell certain investments, knowing them to be unsuitable. These claims in fraud and dishonesty were persisted in for six years, but (save to a limited extent in respect of the Post-Default Claims) were abandoned shortly before the start of the trial. The damages claimed by Springwell run into many millions of dollars. The quantum would be even greater were Springwell to succeed in its shipping loss claim.
16. After various interlocutory skirmishes and appeals, the trial of this case began on 17 April 2007 and concluded on 17 October 2007, after some 68 days in court, of which roughly 54 days were spent on evidence, and 14 days on submissions. The written submissions, although extremely helpful, were voluminous. I received roughly 232 pages of written opening submissions, and over 520 pages of closing submissions, from Springwell, together with numerous appendices. I received roughly 81 pages of written opening submissions, and over 2,310 pages of written closing submissions, from Chase, again with various appendices. The hard copy trial bundles ran to some 23 different sets of lever arch files, totalling some 390-odd lever arch files in all, including some 22 lever arch files of authorities. All these documents were scanned and therefore available for my use on computer, which was of the greatest assistance.

The relevant parties

Chase Entities

17. The relevant Chase entities are the following:

i) the Chase Manhattan Bank, the London Branch of the New York Bank ("CMB") (now JP Morgan Chase Bank ), the First Claimant in the action and First Defendant to the Counterclaim, incorporated under the laws of New York; CMB was the bank with whom Springwell maintained its bank account in London; from 1986 to early 1990, the account was maintained with a unit within CMB, known as the Shipping Department or the Ship Finance Department ("the Shipping Department"); from 1990 to 1998 the account was maintained with a unit within CMB known as the Private Bank ("the Private Bank");

ii) Chase Manhattan International Limited ("CMIL") (now JP Morgan Europe Limited), the Second Claimant and Second Defendant in the Counterclaim, incorporated under English law; in 1997, following a merger with Chemical Bank, CMIL replaced Chase Investment Bank Limited ("CIBL" as defined below);

iii) Chase Manhattan Securities (C.I.) Limited ("CMSCI") (now JP Morgan Securities (C.I.) Limited), the Third Claimant and Third Defendant to the Counterclaim, incorporated under the laws of Jersey; CMSCI was the Jersey issuer of the GKO-Linked Notes, which are the subject of these proceedings;

iv) Chase Manhattan Bank International ("CMBI") (now "JP Morgan Bank International" (LLC)), the Fourth Claimant, incorporated under the laws of Russia; CMBI was Chase's Russian subsidiary, and was a counterparty to what were referred to as "the S Account forwards" referenced in certain GKO-Linked Notes; and

v) Chase Investment Bank Limited ("CIBL") (now JP Morgan Plc), the Fourth Defendant to the Counterclaim, incorporated under English Law; CIBL was the Chase investment bank until 1997 and was the vendor of the investments sold to Springwell; in 1997, and following the merger with Chemical Bank, CIBL was replaced by CMIL. (In this judgment, CIBL and CMIL are from time to time referred to as "the Investment Bank".)

18. Chase merged with Chemical Bank as at 15 July 1996. Prior to the merger, both Chase and Chemical Bank had two entities within their groups which held banking licences and were also regulated by the SFA. Chase had The Chase Manhattan Bank N.A., London Branch of the bank (i.e. CMB) and CIBL (a locally incorporated subsidiary with a banking licence). Chemical Bank had Chemical Bank, London Branch of the bank and Chemical Investment Bank Limited (a locally incorporated subsidiary with a banking licence).When the merger of the two banks took place The Chase Manhattan Bank N.A merged into Chemical Bank which then changed its name to The Chase Manhattan Bank. I refer to this entity as CMB throughout. The effect of the merger was that only one London branch of the merged banks remained, namely CMB, and this entity held both a banking licence and was SFA-regulated.
19. As part of the overall reorganisation triggered by the merger, the transactional business of CIBL moved to Chemical Investment Bank Limited, which was then renamed CMIL as part of the same reorganisation. The exception to this was the finance provided on certain leveraged margin forward business (dealt with later in this judgment) which remained with CIBL. However, just over a year after the merger, there was a change in the method of financing such business (again dealt with later in this judgment) and the Chase margin forward business in CIBL was closed and was replaced on 3 October 1997 with a "Global Master Repurchase Programme", under which CMB provided the financing arrangements for the securities which its customers were purchasing from CMIL.
20. On 30 September 1997, as a further result of the re-organisation, CIBL gave up its banking licence and changed its name to Chase Manhattan plc, removing the word "bank" from its title, and simultaneously becoming SFA lead-regulated rather than Bank of England lead-regulated. Its principal business was mergers and acquisitions as well as acting as arranger and agent for various financial products.

The Polemis Group and the Polemis family

21. The Polemis group of companies (referred to in these proceedings as "the Polemis Group) is a group of loosely related, family-owned companies which at the relevant time were ultimately beneficially owned by Mr. Spiros Polemis ("SP"), his younger brother, Mr. Adamandios Polemis ("AP"), and their mother, the widow of their father, Mr. Leonidas Polemis ("LP"). The principal business interests of the Polemis Group have traditionally been shipping.
22. Like many Greek family-owned shipping businesses, that of the Polemis family was not incorporated under a single structure. As at 1986, the principal management company was Polembros Shipping Limited ("Polembros"), but that company did not own the assets of the business. The principal assets consisted of vessels owned by one-ship companies, which vessels were managed by Polembros. Freights and disbursements were handled by Wintersea Maritime Corporation ("Wintersea"). All of these companies, which were owned by the Polemis brothers and their mother, loosely formed the Polemis Group. As was again typical for many Greek family-owned shipping businesses, the Polemis Group was run in a relatively informal manner, and did not keep formal records such as audited accounts (except for a short period prior to 1980 when accounts were produced in connection with loans obtained from Chase). Basic book-keeping records necessary in order to monitor and control the income and expenses of the shipping business were maintained by SP and AP.
23. As the shipping business expanded, the need arose for the performance of a treasury function within the Polemis Group. By 1986/7 the shipping business was generating funds which were not immediately required as working capital for the Polemis Group's business and, because it was not following such a high expansion policy as in earlier years, the profits of the shipping business were not necessarily required to be deployed immediately in the acquisition of additional tonnage. Accordingly, such funds needed to be managed, and invested, until such time as they might be required for the purposes of the shipping business or, as AP described, the private use of the Polemis family. Springwell was thereby introduced as an additional Polemis Group company in 1986 to carry out the treasury function and at all relevant times (viz. from 1986 to 1998) it operated as the investment vehicle of the Polemis Group, as described, for example, by an employee in the Chase shipping department in a senior officer approval memorandum ("SOAM") dated 7 August 1992. Springwell was incorporated as a Liberian company by articles of incorporation dated 17 March 1986. Its directors were originally George and Andriani Mitsakos (the uncle and aunt of SP and AP, who have since died) and John Baxivanos ("JBAX"), an employee of the shipping business, but these were effectively nominees for AP, SP (and their mother) who controlled Springwell at all material times and were the beneficial owners of its issued share capital. Mrs Polemis played no part in relation to the business. Springwell had no employees. SP had some involvement in the management of Springwell up until about 1990, but thereafter, from 1990 to 1998, it was common ground that the management of Springwell, in the sense of decision making about its investments, was largely AP's alone. He ran Springwell principally from London where he lived during the relevant period. SP did, however, carry out some important, but limited, administrative functions in relation to Springwell. He maintained detailed records of all the trades and transactions, which are the subject of these proceedings, and calculated and recorded yields on each individual investment, After the Russian default, SP took over the principal management of Springwell and its claim against Chase.
24. During the 1960s the Polemis family shipping business was run by LP and his brothers, from New York and London. The business had opened an account with Chase in the 1950s and established a relationship with the bank. The banking requirements of the shipping business, which consisted of operational accounts for the day to day running of the fleet, and loan facilities for the purchase of ships, were provided by Chase in New York. In the late 1960s, SP worked for a time in the family shipping business in New York with one of his uncles. In 1971 LP died unexpectedly and SP moved to London in 1972 to work in the family's office in London.
25. In 1974, SP and AP decided to split from the family business and establish a new shipping group (the Polemis Group, as defined above) and a new shipping management company, namely Polembros, operating from offices in London and Piraeus, under the control of SP, AP and their mother. The fleet was, at all material times, a combined tanker and dry cargo fleet. Polembros had its own bank account for day-to-day expenses such as rent and salaries, at a branch of Barclays Bank plc, close to the Polemis Group offices in London W1. However from 1974 to 1998 all of the Polemis Group's principal shipping accounts were opened with Chase in New York, London, Jersey and Piraeus; in particular, operating accounts were opened with Chase for the receipt of freights and payments from the shipping business.
26. The new Polemis Group began with three vessels under its management. Chase had financed the original transfer of these vessels to the Group from the old family business in 1974. By 1977, and after taking advantage in particular of developments in the North Sea, the fleet had expanded to seven vessels. Chase had also financed the purchase of one of two second hand tankers bought in 1974 and a further two in 1977. The Polemis Group was successful and profitable. Over the period 1980 to November 1986, the Group expanded rapidly, buying cheap second-hand ships with only limited finance so that the fleet grew from six to 23 vessels (with an average age of 16 years) over that time. In large measure, the fleet expansion was undertaken by the Polemises for cash. Only limited finance was taken out to assist in the purchases being made. In 1983, a loan was arranged with Bank of America in connection with the purchase of one vessel, and in 1985 and 1986 two more loans were arranged with Chase. Otherwise, the fleet was generally debt free.
27. From the early days, the Polemis fleet was an old fleet, comprising aged tankers and other vessels. The brothers specialised in acquiring and operating vessels which were close to scrapping age, and they did so very successfully. Their acquisitions were thus generally of a low capital value, which they could make with cash. The Group did purchase one new tanker, the Neptune Dorado, during the 1980s. This vessel was ordered in 1983 for delivery in 1985, and financed by Chase through a term loan for just over $ 12 million repayable over 10 years. AP arranged the finance for this newbuild and generally dealt with any finance required for the ships.
28. AP was born in 1949, educated in Greece and then attended university in the USA, studying naval architecture and marine engineering. He had no formal training in finance. SP was born in 1944, educated in Greece and also attended university in the USA, gaining a bachelors degree in 1967 and a Masters in 1970. In 1974, AP worked for a short time in the Piraeus office of the Polemis Group. In 1975, AP moved to London and joined his brother, SP, working in the London offices of the Polemis Group which were based in South Audley Street, W1. Between 1975 and 1994, the brothers shared an office at South Audley Street. In 1994, the offices moved to Park Street, W1 and the arrangement whereby the brothers shared an office did not continue. Between 1975 and 1996, both AP and SP were based in London. but, between 1981 and 1985/86, SP spent a large proportion of his time in Brazil, where he built up a successful relationship with Petroleo Brasileiro SA ("Petrobras"), the Brazilian state oil company, the Polemis brothers having identified that there was a need in Brazil for ships capable of offshore loading in similar fashion to the successful operation in the North Sea. The Polemis Group chartered its first vessel to Petrobras in about 1981 and dealings with Petrobras expanded rapidly from then onwards, so that, in 1983, the Polemis Group opened an office in Brazil. During this time, SP developed and managed the Group's Brazilian contacts and business operations.
29. Over time the Group employed up to eight of their pre-1970 tankers on time charter employment with Petrobras as storage or shuttle tankers but, by December 1991, the Group was looking for alternative employment for its old tonnage, as AP thought that it was unlikely that charter contracts were going to be renewed by Petrobras. The Brazil office was closed after 10 years of operations in 1992 which, effectively, marked the end of the Petrobras business for the Polemis Group too.
30. In 1996, SP moved back to Greece, while AP remained in London. There was, however, no formality in the division of responsibility between the two brothers. Initially, and during the very early years, AP's role was on the technical side of the business and he was involved with the running of the fleet, operations and repairs, and SP concentrated on the commercial side of the business, chartering, sale and purchase and building up contacts. However, after SP turned his focus to Brazil in 1981, AP took on more of the responsibility for the management of the shipping business of the Polemis Group in London and Piraeus.
31. The brothers were extremely close and operated as equal partners, based on complete trust in each other. Although they were in regular contact, they did not regard it as their role to second-guess, or to interfere with, decisions made by the other. The Polemis Group business relocated to Piraeus in 1999, after the events with which this litigation is concerned.

The Key Issues

32. Shortly before the end of the trial, I directed the parties to agree a list of key issues ("Key Issues") which fell for my decision. The agreed list ("the List of Issues") identifies the Key Issues arising in relation to:

i) the general advisory claims; these are the Investment Claims as defined above, other than the breach of fiduciary duty and negligent misrepresentation claims;

ii) the negligent misrepresentation claims;

iii) the breach of fiduciary duty claims; and

iv) the Post-Default Claims.

The Key Issues, as slightly redrawn and amplified by me, but maintaining the parties' numbering, are set out in full in Appendix 1 to this judgment.

Section II: General advisory claim – Issue 1.1: Did Chase owe a contractual and/or tortious duty of care to Springwell to advise it as to appropriate investments

Relevant Key Issues

33. The Key Issues that arise in relation to the question as to whether Chase owed a contractual and/or tortious duty of care to Springwell to advise it as to appropriate investments were summarised in the List of Issues as follows.

"General Advisory Claim

Key issue 1.1.

1.1. Contractual or Tortious Duty? Did Chase owe a contractual and/or tortious duty of care to Springwell to advise it as to appropriate investments? If so, what was the extent of such duty?

The sub-issues arising under this main issue are:

[No issue is defined by the parties as sub-issue 1.]

2. What was the nature of the relationship between Springwell and Chase? In particular:

(1) In what circumstances was Justin Atkinson ('JA'), the Chase salesman who was principally responsible for selling Springwell the relevant securities, introduced to AP?

(2) What contractual terms governed the relationship between Springwell and Chase?

(3) What was the nature of the service which Chase provided to Springwell and/or held itself out as providing to Springwell?

3. Do certain terms ("the Relevant Provisions") contained in the following documents between the parties ("the Relevant Documents"):

(1) a Master Forward Agreement dated 24 April 1992 ('the MFA') between Springwell and CIBL and confirmations executed under it;

(2) a letter dated 28 May 1993 entitled Dealings in Developing Countries Securities ('the 1993 DDCS Letter') from CMB to Springwell;

(3) a letter dated 17 September 1997 entitled Dealings in Developing Countries Securities ('the 1997 DDCS Letter') and in substantially similar terms to the 1993 DDCS Letter;

(4) a Global Master Repurchase Agreement dated 22 September 1997 ( 'the GMRA') between CMB and Springwell;

(5) certain leverage confirmations; and

(6) in respect of the GKO-linked Notes, the terms of confirmations, term sheets and the Notes themselves;

have the effect of excluding or restricting Chase's duties and/or of estopping Springwell from pursuing any claim for breach of duty or misrepresentation?

In particular the following issues arise:

(i) What, as a matter of construction, is the effect of the Relevant Provisions and in respect of which investments purchased by Springwell? In particular, do they have the effect of precluding Springwell's claims?

(ii) If the effect of the Relevant Provisions is as Chase contends, are the Relevant Provisions nonetheless unenforceable, because they involved a radical departure from the advisory relationship which had originally been set up and by virtue, in particular, of any of the following matters raised by Springwell:

(a) breach of fiduciary duty as a result of a breach of the fair dealing rule and/or an abuse of confidence;

(b) the principle in Interfoto v Stiletto [1989] QB 433, at 439, namely that because Chase allegedly did not do anything to draw the relevant Provisions to Springwell's attention, Chase should not be entitled to enforce them;

(c) misrepresentation by Chase as to the content and effect of the Relevant Provisions;

(d) unilateral mistake on the part of Springwell as to the content and effect of the Relevant Provisions, coupled with knowledge on the part of Chase of such mistake and, overall, unconscionable behaviour on its behalf;

(e) estoppel by convention and/or representation so as to bar Chase from relying upon the Relevant Provisions to deny the advisory relationship and its consequences, based on the allegation that, at all material times after the documentation was signed, Springwell continued to look to Chase for advice and Chase continued to give such advice and act as Springwell's investment advisor in exactly the same way as it had always acted and held itself out to Springwell as so acting;

(f) section 2 and section 3 of the Unfair Contract Terms Act 1977 ("UCTA ") and section 3 of the Misrepresentation Act 1967 ("the 1967 Act").

4. Depending upon the determination of the above issues,

(1) Did any or all of CMB, CIBL and CMIL contract to advise Springwell as to appropriate investments and owe contractual duties of care in doing so?

(2) Did any or all of CMB, CIBL and CMIL owe tortious duties of care to Springwell in giving investment advice?

5. If Chase owed contractual and/or tortious duties of care to Springwell, what was the ambit of the duties owed?

(1) Did they extend, as Springwell alleges, to the matters set out in Section 6.3.1 of its written opening argument ('the Springwell Opening' ) or were they limited, as Chase alleges, to the matters which Chase pleads in its Further Information (at page A5/010 of the trial bundle, paragraph 1), and at paragraphs 87-90 of its written opening argument ('the Chase Opening')?

(2) What is the impact on that question (if there is any) of the SIB Statements of Principle, the SFA Rules (and the Private Customer/Non-Private Customer distinction) and the Grey Paper regime/London Code of Conduct?"

Springwell's case as to the existence of an advisory obligation: contract

34. Springwell's case in contract is that each of CMB, CIBL and (from April 1996) CMIL, had a contractual obligation to advise Springwell as to appropriate investments, and to use reasonable skill and care in so doing, in return for the reasonable profits, fees and commissions, which Springwell, by AP, knew and impliedly consented to those entities earning, from their dealing with Springwell^[3]. Springwell's pleadings are somewhat vague as to precisely when and in what circumstances contracts in such terms were entered into, or indeed their precise terms. However, in its written opening and closing submissions, Springwell's case in contract was summarised as follows^[4]:

i) CMB's contractual obligation as private banker to advise as to appropriate investments arose:

a) under the terms of the banking contract concluded between CMB and Springwell in 1986, when Springwell first became a customer of CMB, such investment advice being a service provided pursuant to the terms of that contract;^[5]

b) in 1987, at the time when:

i) CMB, acting by Evangelos Mellis ("EM"), head of the Greek Shipping Department within Chase in London, and subsequently head of Global Shipping and Head of the Hellenic Group), introduced AP to Justin Atkinson ("JA"), an employee of CIBL, who, at that time, was a salesman on the Chase Money Market desk in London, selling debt securities known as European Commercial Paper ("ECP");

ii) CMB, acting by EM and JA (who was held out by EM as acting on behalf of CMB in circumstances where no distinction was made between CMB and CIBL) offered Springwell an advisory service which was accepted by Springwell "when it first received and acted upon advice from JA"^[6];

ii) CIBL's contractual obligation to provide appropriate investment advice arose in the same manner as that set out at subparagraph (1)(b) above; thus AP was offered an investment advisory service jointly by CMB (acting by EM and JA) and by CIBL (acting by JA); and

iii) CMIL's contract to provide appropriate investment advice came into existence when it succeeded to the business of CIBL on or about 8 April 1996.

Springwell's case as to the existence of an advisory obligation: tort

35. Springwell's case in tort is that CMB, CIBL and, from about 8 April 1996, CMIL had tortious obligations to give appropriate investment advice to Springwell. Again, I found Springwell's case and pleadings as to the existence of such a duty to be somewhat opaque. It shifted in focus and emphasis over time, which gave rise to complaints by Mr. Mark Hapgood QC, leading counsel on behalf of Chase. The case in tort is summarised in paragraph 72(a) of the RADC, which alleges that, even in the absence of any contractual obligation to do so, these Chase entities assumed a responsibility to give such advice to Springwell by reason of:

i) the circumstances in which JA was introduced to AP; and

ii) the facts and matters referred to at paragraphs 34, 35, 52, 55, 58(b), 589C0, 59(b) and 70 of the RADC.

36. Those facts and matters were alleged to have been the following:

i) the fact that EM, a friend of AP from the early 1980s, who met with SP socially on many occasions, and, on behalf of Chase, regularly hosted dinners for members of the Greek shipping community, allegedly made statements to AP to the following effect:

a) that he was the person at Chase who was in charge of looking after all the banking requirements of the Greek shipping community in London;

b) that Chase wished to provide a full banking service to the Greek shipping community, involving more than just ship finance; in particular Chase was able to offer a full private banking advisory and wealth management service; and

c) that EM would ensure that the interests of the Greek ship owning families were properly served in all respects by Chase^[7];

ii) the fact that:

"… as a result of their many conversations … Chase by EM knew:

(a) that AP had no background, education, training or experience in investment or fund management;

(b) that AP had no particular interest in investment or fund management;

(c) that AP's working day was occupied almost entirely by managing the shipping business;

(d) that AP did not keep up to date with financial markets, and did not read the financial press; and

(e) that AP had no access to daily or real-time financial information services such as Reuters or Bloomberg."^[8]

iii) the fact that, at all material times, Chase by EM, Finbar Sheehan ("FS") (assistant to EM in the Shipping Department, and subsequently, after EM's departure, Springwell's relationship manager), JA, and other Chase employees knew:

"a) that the funds held by Springwell were derived from the shipping business;"

b) that when the shipping business required cash to meet significant items of income expenditure it was paid the required funds from Springwell;

c) that any significant capital expenditure required by the shipping business (or by SP or AP) would be met from funds held by Springwell;

d) that Springwell was controlled by AP and SP, and that its directors were mainly nominees for AP and SP;

e) that the relationship between Springwell and the shipping business was conducted in the relatively informal way described in the [RADC];

f) that insofar as the shipping business had been generating surplus funds, those funds had been placed on short-term deposit with banks and had not been invested, and that after Springwell was acquired in June 1986, this practice continued until JA began to advise AP;

g) that Springwell's function was to act as a corporate vehicle holding the personal wealth of the families of AP and SP derived from the shipping business;

h) that AP intended to accumulate capital in Springwell so as to fund the new building programme for the shipping fleet described in the Defence;

i) that AP was not an expert or sophisticated investor and he had no experience of investment or fund management; and

j) that Springwell did not have the technical resources or staff to carry on an investment or fund management business and in fact had no employees at all";^[9]

iv) the fact that:

"… in about late 1987, EM introduced AP to JA. The gist of the introduction was:

(a) that JA was person who could advise AP as to alternatives to time deposits for Springwell's funds which would give him a better return; and

(b) that JA was part of EM's "team" at Chase and his work would be subject to EM's supervision and control."^[10];

v) the fact that:

"these statements were made during the course of the first introduction of JA at a meeting held in AP's offices in London, and subsequently in discussions between EM and AP during which EM encouraged AP to take JA's advice to invest Springwell's funds rather than simply placing them on time deposit^[11]";

vi) the fact that in the manner particularised in paragraphs 4-24 of Springwell's Voluntary Particulars:

"JA did give investment advice to Springwell and held himself out to Springwell as giving such advice and as managing and taking care of Springwell's portfolio with AP;"^[12]

vii) AP's later conversations with, in particular, EM and Stewart Gager ("SG") from Chase Private Bank New York, who was head of the Hellenic Group from March 1996-1999, in which each of those individuals conveyed the impression that JA was part of their team at Chase providing investment advice to Springwell;^[13]

viii) the fact that Chase regarded itself as Springwell's "trusted financial advisor"^[14];

ix) the fact that:

"it was, or should have been apparent to JA from his dealings with AP (as described in the Defence and as further particularised in paragraph 4 – 25 of the Voluntary Particulars) and from Chase's knowledge of AP and Springwell referred to paragraph in paragraphs 35 and 52 of the Defence, which was or should have been communicated to JA:

that AP was not a professional investor carrying on an investment or fund management business, and that he had no experience of investment or fund management;"

that AP was not in a position to evaluate for himself the appropriateness of the investments which JA was advising Springwell to purchase;

that Springwell did not have either the technical resources or the staff to carry on a professional investment and fund management business, and in fact had no employees at all; and

that AP was relying entirely on JA to advise him as to what investments were appropriate for Springwell having regard to both the particular characteristics of individual investments and the balance of the portfolio as a whole.^[15]"

x) the facts set out in paragraph 9, 13, 14, 18, 19 and 22 of Springwell's Response dated 30 July 2004. These include references to AP's understanding that JA was giving advice; that JA in fact, throughout the period:

"occupied an advisory role where he recommended investments to Springwell as being appropriate investments for Springwell to make.";

that AP: "… lacked both the information and expertise" to select and assess which investments were suitable for Springwell, and because, as he understood it, JA was providing this very service;

that during the course of their dealings, JA

"frequently commented that he was always trying to source and recommend the best investments for AP to be purchased by Springwell".

37. Thus, Springwell relied both on the arrangements which it alleged were put in place at the start of its investment relationship with Chase and on the course of dealings between the parties thereafter. Mr. Michael Brindle QC, on behalf of Springwell, submitted that Chase's undertaking to advise Springwell and its giving of advice was a paradigm example of a defendant:

"tender[ing] skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his…advice"; see per Lord Mance in Commissioners of Customs & Excise^[16].

38. In particular, to support the existence of a tortious duty of care, Mr. Brindle relied upon the facts that:

i) CMB and CIBL and (from on or about 8 April 1996) CMIL professed to have expertise in the field of investments and investment advice;

ii) CMB and CIBL and (from on or about 8 April 1996) CMIL undertook to advise Springwell as to appropriate investments;

iii) Springwell reasonably relied upon that undertaking and the advice given;

iv) CMB and CIBL and (from on or about 8 April 1996) CMIL knew, or ought to have known through JA, EM, FS, Mario Ferrazzi ("MF"), head of the European Shipping Group and the Hellenic Group (1994- March 1996), Robert Crawley ("RC"), who held various jobs in the Shipping Department at Chase, London, including Relationship Manager for the Polemis Group from early 1988, Head of Hellenic Shipping (1996-2000), and Head of European Shipping (2000 – 2003), and SG, that it was so relying because:

a) they each knew or ought to have known that Springwell looked to JA to provide the promised advice; and

b) they each knew or ought to have known that Springwell relied upon JA and the advice he gave.

The shift in focus of Springwell's case

39. In closing submissions, Mr. Mark Hapgood QC, on behalf of Chase, complained that the focus of Springwell's case had shifted over the course of the trial from the principal allegation in its pleaded case (viz. that the advisory relationship was between the investment bank, CIBL (and then CMIL) through the advice provided by JA, and that the Investment Bank's (i.e. CMB's) obligations were to supervise the investment bank and JA), to a more closely, and narrowly, defined case. This was that, as Springwell's portfolio became larger and more concentrated in Russian securities, CMB itself, irrespective and independently of the role of JA, became subject to a duty to warn Springwell of the risks inherent in the Russian concentration in its portfolio and the need for greater diversification. Mr. Hapgood pointed out that Springwell had never identified, let alone pleaded, a date when CMB assumed a responsibility to advise in such a way. Mr. Hapgood complained that such a case was not only not open to Springwell on its pleadings, but also was inconsistent with the manner in which Springwell had formulated its closing submissions on the evidence.
40. I agree with Mr. Hapgood that the principal emphasis in the pleadings, and in the witness statements, was focused on the advisory role of JA, as supervised by the Investment Bank. I also agree with him that, during the course of the trial, there was a significant shift in Springwell's case, so that the primary focus at the close of the case was on an alleged advisory relationship on the part of the Chase shipping department and subsequently the Investment Bank, CMB. I also agree with him that the unnecessarily prolix nature of Springwell's pleadings does not make it easy for even the diligent reader to appreciate precisely what case is being made in this respect, and indeed many other respects. However, I do not accept his submission that it is not open to Springwell (whether on the pleadings or given the way in which it presented its case) to contend that CMB itself had separate advisory responsibilities to Springwell beyond those discharged, either on its behalf through JA, or by JA on behalf of CIBL or CMIL, or to contend that these obligations arose or changed over time. I accept Mr. Brindle's submissions^[17] that, given the wide-ranging factual circumstances pleaded in the RADC and elsewhere, and the evidence contained in the written factual and expert witness statements, it is open to Springwell to contend not only that CMB, as private bankers, owed a duty independent of that of JA, but also that CMB's advisory role changed over time so as to impose the obligation on CMB as the Investment Bank, not merely to monitor JA's role to ensure that he was giving appropriate advice, but also to ensure that, insofar as he was not doing so, Springwell received adequate and appropriate investment advice from CMB including advice as to diversification and allocation of investment throughout Chase's trading relationship with Springwell.

The extent of the duties of care alleged against Chase

41. It is necessary to emphasise that the duties of care, which Springwell alleged that Chase owed from 1987 onwards, are of a very wide-ranging and onerous nature. The "advisory role" is said to have given rise to a duty of care which had numerous necessary incidents. These were pleaded as follows^[18]:

"74. As necessary incidents of CMB's, CIBL's and CMIL's duties of care to Springwell, CMB, CIBL and CMIL were bound:

(a) to establish in discussion with AP Springwell's investment expertise, investment objectives and attitude to risk having regard to Springwell's strategic function as described in paragraphs 40 to 44 above;

(b) to ensure that their understanding of Springwell's investment expertise, investment objectives and attitude to risk was recorded accurately in writing and communicated to AP as Springwell's principal and confirmed by him as being correct;

(c) at regular intervals to review Springwell's investment objectives and attitude to risk so as to identify any changes in them;

(d) to record accurately in writing the results of all such reviews and to communicate them to AP and to have them confirmed by him as being correct;

(d1) at regular intervals to review Springwell's portfolio against what had been established as its investment objectives and to take reasonable care to ad-vise Springwell of the results of such review and of any steps necessary to render Springwell's portfolio consistent with those investment objectives;

(e) to take reasonable care in advising Springwell that the portfolio as a whole was appropriate having regard to what had been established as being Springwell's investment objectives and attitude to risk;

(f) to take reasonable care in advising Springwell in respect of particular investments, that such investments were appropriate having regard to what had been established as being Springwell's investment objectives and attitude to risk;

(g) to give adequate explanations to AP so as to enable him to understand the risks inherent in particular investments, and to understand the balance of risk inherent in the portfolio as a whole;

(h) to advise AP as to what credit arrangements, if any, were appropriate for Springwell having regard to what had been established as being Springwell's investment objectives and attitude to risk;

(i) to give adequate explanations to AP of all credit arrangements made with Springwell, and of the risks inherent in such arrangements, so as to enable him to consider whether or not it was appropriate for Springwell to enter into such arrangements at all, and/or what level of borrowing was appropriate;

(j) to give adequate explanations to AP of a]l documentation to be signed by Springwell (including, if and to the extent that the Relevant Provisions had the effect contended for by Chase. explaining the existence and effect of the Relevant Provisions in the Relevant Documentation).

75. These duties were continuing duties which subsisted throughout the period of Springwell's dealings with Chase.

76. Further, insofar as Chase became aware that any of its staff had acted in breach of any of the duties identified in paragraph 74 above, it was under a continuing further duty disclose such breaches to AP, to advise AP as to what steps should be taken to remedy the breach and to render Springwell's portfolio consistent with what had been established as being Springwell's investment objectives and attitude to risk.

77. Further, when CMB by EM and his successors at the Private Bank caused or permitted JA as an institutional salesman to have direct access to Springwell, Chase owed a duty to Springwell to:

(a) disclose to Springwell by AP that it was dealing with an institutional salesman whose principal function was to sell paper on behalf of Chase;

(b) ensure that JA clearly understood the basis on which he was dealing with Springwell, and in particular that in his dealings with Springwell he was bound to ensure that investment advice given by him was appropriate for Springwell's investment objectives and attitude to risk, both in relation to particular investments and in relation to the portfolio as a whole; and

(c) ensure that arrangements were in place so that appropriate supervision and control was exercised over JA to ensure that he was fulfilling his obligations referred to in sub-paragraph (b) above."

42. In summary, on Springwell's case, Chase was responsible for selecting and constructing Springwell's entire portfolio and providing ongoing investment advice about it, on what became effectively a daily basis, throughout all of Springwell's dealings with Chase.
43. It is also important to distinguish at the outset between this general claim based upon a wide duty to advise on the one hand, and any more specific claim in negligent misstatement or misrepresentation on the other. Under the general advisory claim, what is alleged is that, because there was an "advisory relationship", every time that JA offered an investment for sale to Springwell, he was obliged to give, and was implicitly giving, advice as to the suitability and risk characteristics of that investment, both on its own and as part of Springwell's overall portfolio.^[19] It appears to be said that this was so even if it followed an express request by AP to find a particular type of investment, for instance GKO-Linked Notes, or to find investments that met particular requirements, for instance as to price. Indeed, as damages are sought for a failure to advise Springwell to sell investments, it appears that Springwell's case, at its highest, is that JA was obliged to give, and implicitly gave, ongoing and updated advice as to the merits of retaining every investment which Springwell had previously purchased.

The legal approach to the determination as to whether an advisory duty existed

44. As I have already stated, Springwell's case as to the alleged advisory relationship is put in contract and in tort.
45. The bank mandate signed by Springwell when it first opened its account with CMB in July 1986, which was on standard terms, does not expressly provide any contractual basis for the advisory relationship of the sort alleged. It does not refer to any obligation on CMB's part to advise Springwell; nor, in my judgment, could any such duty be implied merely from the express terms of a mandate in such a form.
46. As Mr. Hapgood submitted, the reality is that this is a case where the alleged contract and the alleged duty of care are concomitant and co-extensive. Thus, an analysis of the relationship between the parties, by means of an objective analysis of the relevant facts relating to the dealings between the parties in the relevant contextual scene, therefore informs the court both whether a contractual duty and a tortious duty of care exist^[20].
47. Since the starting point of Hedley Byrne v Heller^[21], the Courts have, on many occasions, sought to define the circumstances in which one party will owe a duty of care in tort giving rise to a liability in economic loss. Such cases, as the present, are often "quasi-contract" cases, where the relationship between the parties is said to be one of, or akin to, contract, and where the contractual and tortious analysis is essentially the same. The cases were most recently reviewed by the House of Lords in Commissioners of Customs & Excise v Barclays Bank^[22], a case which arose in a non-contractual setting (notice of a freezing order). The speeches in that case referred to the three tests which had been used in deciding whether a defendant sued as causing pure economic loss to a claimant owed him a duty of care in tort^[23]:

i) the assumption of responsibility test, coupled with reliance;

ii) the "three-fold-test" (whether the loss was reasonably foreseeable, whether the relationship between the parties was of sufficient proximity and whether in all the circumstances it is fair just and reasonable to impose such a duty); and

iii) the incremental test.

48. Ultimately, the conclusion of their Lordships was that there was no single common denominator, with all of the tests operating at a high level of abstraction. However, what each test emphasised was the need to take into account all the relevant facts in the overall determination. As Lord Bingham said:

"… it seems to me that the outcomes (or majority outcomes) of the leading cases cited above are in every or almost every instance sensible and just, irrespective of the test applied to achieve that outcome. This is not to disparage the value of and need for a test of liability in tortious negligence, which any law of tort must propound if it is not to become a morass of single instances. But it does in my opinion concentrate attention on the detailed circumstances of the particular case and the particular relationship between the parties in the context of their legal and factual situation as a whole".^[24]

49. Likewise, Lord Hoffmann^[25] also emphasised the need for a practical approach to the question whether a duty of care exists, and the evolution of "lower level principles" as a more useful guide than "high abstractions":

"35. There is a tendency, which has been remarked upon by many judges, for phrases like 'proximate', 'fair, just and reasonable' and 'assumption of responsibility' to be used as slogans rather than practical guides to whether a duty should exist or not. These phrases are often illuminating but discrimination is needed to identify the factual situations in which they provide useful guidance. For example, in a case in which A provides information to C which he knows will be relied upon by D, it is useful to ask whether A assumed responsibility to D: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465: Smith v Eric S Bush [1990] 1 AC 831. Likewise, in a case in which A provides information on behalf of B to C for the purpose of being relied upon by C, it is useful to ask whether A assumed responsibility to C for the information or was only discharging his duty to B: Williams v Natural Life Health Foods Ltd [1998] AC 830. Or in a case in which A provided information to B for the purpose of enabling him to make one kind of decision, it may be useful to ask whether he assumed responsibility for its use for a different kind of decision: Caparo Industries plc v Dickman [1990] 2 AC 605. In these cases in which the loss has been caused by the claimant's reliance on information provided by the defendant, it is critical to decide whether the defendant (rather than someone else) assumed responsibility for the accuracy of the information to the claimant (rather than to someone else) or for its use by the claimant for one purpose (rather than another). The answer does not depend upon what the defendant intended but, as in the case of contractual liability, upon what would reasonably be inferred from his conduct against the background of all the circumstances of the case. The purpose of the inquiry is to establish whether there was, in relation to the loss in question, the necessary relationship (or 'proximity') between the parties and, as Lord Goff of Chieveley pointed out in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181, the existence of that relationship and the foreseeability of economic loss will make it unnecessary to undertake any further inquiry into whether it would be fair, just and reasonable to impose liability. In truth, the case is one in which, but for the alleged absence of the necessary relationship, there would be no dispute that a duty to take care existed and the relationship is what makes it fair, just and reasonable to impose the duty.

36. It is equally true to say that a sufficient relationship will be held to exist when it is fair, just and reasonable to do so. Because the question of whether a defendant has assumed responsibility is a legal inference to be drawn from his conduct against the background of all the circumstances of the case, it is by no means a simple question of fact. Questions of fairness and policy will enter into the decision and it may be more useful to try to identify these questions than simply to bandy terms like 'assumption of responsibility' and 'fair, just and reasonable'. In Morgan Crucible Co plc v Hill Samuel & Co Ltd [1991] Ch 295, 300-303 I tried to identify some of these considerations in order to encourage the evolution of lower-level principles which could be more useful than the high abstractions commonly used in such debates."

50. However, as was pointed out in William v Natural Life Health Foods Ltd^[26], whatever the formulation of the test, it requires an objective ascertainment of the relevant facts, the primary focus being on exchanges between the parties:

"The touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff. Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene. Subject to this qualification the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff".

51. As Mance J (as he then was) pointed out in Bankers Trust v PT Dharmala Sakti Sejahtera ^[27], the ultimate decision whether to recognise a duty of care, and if so of what scope, is pragmatic.
52. In the present case, the relevant "lower level" factors that, in my judgment, serve as indicators of the existence (or otherwise) of a contractual or tortious duty of care are at least the following:

i) the contractual context (including the terms of the relevant contractual documents and disclaimers, and the absence of any written advisory agreement);

ii) what, if anything, was said to AP by Chase representatives when he was introduced to JA in 1987/1988;

iii) the actual role played by JA (including the purpose for which he was giving AP recommendations or advice) over the relevant period 1987-1998;

iv) the actual role of the Shipping Department in the period 1987 - 1990, and, subsequently, the Private Bank, in the period 1990 -1994;

v) the extent of AP's financial experience or sophistication;

vi) the extent of AP's reliance on JA, CMB, CIBL and CIML, including the extent to which it was foreseeable that he would rely upon them for the investment advice Springwell alleges it should have been given; and

vii) the regulatory background.

53. All these factors emerge as features at various stages of the narrative chronology of the relationship between Springwell and Chase. I turn, therefore, to analyse the relationship between Chase and Springwell for the purpose of determining whether CMB, CIBL or CMIL did indeed have the alleged contractual or tortious obligations to Springwell to give it the alleged appropriate investment advice. In so doing, I identify, where appropriate, the relevant factors as referred to above. Unlike Springwell's approach, which was to regard "Chase" as one composite entity, I find it necessary, for the purposes of determining whether a duty of care exists, to identify the relevant corporate entity in relation to which the analysis is directed.
54. In Bankers Trust International plc v PT Dharmala Sakti Sejahtera^[28], a case having some similar features to the present, where allegations of misrepresentation, breach of contract and breach of duty of care were made against a bank in relation to derivative transactions, Mance J (as he then was) made the following comment^[29]:

"The relationship under examination is not the conventional banker-customer relationship, although that too may on occasions be affected by representations, undertakings or the assumption of an advisory role. The bank here was marketing to existing or prospective purchasers derivative products of its own devising which were both novel and complex. The analysis of the relationship is in the circumstances one of some delicacy."

That comment is singularly apposite to the present case.

The ambit of the factual inquiry

55. The parties, in their opening and closing submissions, have presented very detailed written arguments (backed up by extensive references to the very lengthy evidence), relating to the relationship between Chase and Springwell in the years from 1986 to 1998. Springwell contended in its opening and closing written submissions that the circumstances in which the relationship between it and Chase was established, and the early history of that relationship are of

"fundamental importance to the case since neither party suggests that the basic nature of the relationship changed, other than in points of detail thereafter".

56. However, at various times in argument and in evidence^[30], Springwell also, in the alternative, contended that even if, originally, JA was no more than a salesman, nonetheless, over time he became a fully-fledged investment advisor. Thus Mr. Brindle submitted that, even leaving aside the circumstances in which JA was introduced to AP, and the role of the Private Bank, the width of the advisory activities which JA held himself out as performing, and actually performed, during the subsistence of the relationship, was "sufficient to crystallise advisory obligations on their own". He accepted that the extent of any advisory obligations assumed was always a fact-sensitive enquiry and that there can be different types or degrees of advice; thus he accepted that a bank which gives a client an ad hoc piece of investment advice once should not be taken to have assumed the role of a general investment advisor. He helpfully identified the Court's task as follows:

"It is critical, therefore, to assess the width of the advisory activity which a party holds itself out as undertaking. There is a spectrum of possibilities. At one end there will be an ad hoc piece of advice in response to a specific request with no expectation by either party of a further request or of further advice to come. At the other end a party will hold itself out as advising and willing to advise on an on-going basis both on particular investments and on the general composition of a client's portfolio as a whole."^[31]

I agree with that approach.

57. It is therefore Springwell's case that, even disregarding the circumstances of JA's introduction and the role of EM and his successors at the Private Bank, Chase (through the activities of JA) firmly positioned itself at the latter end of the spectrum, that is to say, advising on an on-going basis both on particular investments and on the general composition of a client's portfolio as a whole. He relied, in particular, on the transcripts of telephone conversations between JA and AP relating to the period from May 1997 onwards (transcripts of earlier conversations not being available). He submitted that, subject to two caveats^[32], the court should, however, proceed on the basis that the content of the transcripts in that period is indicative of the sort of conversations which JA and AP were having in the years prior to that period. I agree with that general approach, at least from 1990.
58. As I have already mentioned, Springwell also contended that, irrespective and independent of the circumstances of JA's introduction to AP, or indeed, JA's actual role, CMB, first by its Shipping Department, and subsequently by its Private Bank department, owed, as "private banker" either from inception, or as a result of the Private Bank's subsequent conduct, a duty to advise Springwell, as general investment advisor, as to appropriate investments in the wide terms pleaded.
59. It is therefore incumbent on me not only to consider the position at the date, and as a result, of the introduction of JA to Springwell, but also to consider the ongoing relationship (a) between Springwell (acting by AP) and JA (whether acting on behalf of CMB, CIBL and /or CMIL) and (b) the Private Bank (acting through other personnel) and Springwell (acting by AP) over time, so as to see whether the relationship had developed into something different by 1996-1998. The following summary of the relevant evidence, whilst not necessarily rehearsing every evidential milestone, attempts to identify those facts that I consider relevant in reaching my conclusions as to the existence, or otherwise, of a duty of care at various stages of the relationship. Necessarily, in some instances, it is relevant to have regard to evidence, or lack of evidence, in relation to subsequent periods beyond the particular period under consideration.
60. The evidential narrative is also relevant to subsequent issues that are defined in the Key Issues, such as Springwell's investment objectives, breach and causation, on the assumption that Springwell succeeds in establishing its case that Chase owed Springwell a duty of care.
61. For practical reasons, I propose to conduct the analysis as to whether the alleged duty of care existed by reference to three different points in time or periods in the chronology:

i) first, the position needs to be examined after, and as a result of, the introduction of JA to Springwell in December 1987 or March 1988, and the circumstances surrounding that introduction; the determination of the issue as at this date also requires a consideration of certain of the subsequent evidence relating to the early period of Springwell's trading from 1987 to 1990, when Springwell's account was with the Shipping Department;

ii) second, the position needs to be examined as at April 1994, at which date EM left Chase, by reference to what occurred during the period 1990 to April 1994, during which Springwell's account was with the Private Bank department of CMB, under the supervision of EM as head of the Hellenic Group;

iii) third, the position needs to be examined as at 17 August 1998 (the date when the Russian Government and the Central Bank declared a 90 day moratorium on foreign debt repayment, the suspension of all trading on GKOs and their intended restructuring, and the widening of the rouble-dollar exchange corridor to 6.0-9.5R/$), by reference to what occurred during the period 1994-1998, and, in particular, the period 1997–1998, during which Springwell's emerging markets portfolio built up a substantial concentration in Russian securities, so that they constituted 45.5% of Springwell's emerging markets portfolio by market value as at 31 July 1998.

62. I shall set out the relevant factual narrative loosely by reference to these three periods. In the case of the first period, I shall state my conclusion on the Key Issue as to whether a duty of care existed as a result as the introduction of JA to Springwell and the circumstances surrounding it, at the end of that section of the factual narrative. However, in relation to the two later periods, where many of the relevant factors which point to, or against, the existence of a duty are common, I shall state my conclusion in relation to both periods in a subsequent section, following the factual narrative dealing with those periods.

Credibility of AP as a witness

63. I should express my views about the credibility of AP as a witness. I had the opportunity of observing him for over 12 days in the course of his cross-examination, as well as reading his very lengthy witness statements. I also had the advantage, in my own time as well as in court time, of hearing the contemporaneous audio transcripts of many of his telephone conversations with JA during which they discussed what products JA had on offer, and what investments Springwell should make. I was therefore in an extremely good position to make an informed assessment as to his reliability as a witness.
64. In the tape-recorded conversations, AP presented as a commercially astute and clever business man, who, in his dealings with Chase, appeared confident and in control. Although, with rare exceptions, he was courteous in his discussions with JA, the tapes showed that, at all times, AP was in charge of the conversations, and dictating their direction. He was domineering and, to some extent, opinionated. He would pump JA for information, interrupting JA when AP did not want to listen any more, and would move on to another topic, when he decided to do so. By the time of the recorded conversations, he came across as sophisticated and knowledgeable about emerging markets investments and familiar with the jargon used by JA. Obviously his knowledge was not as extensive as that of JA, but he never gave the impression of a man out of his depth or one who was unable to cope with the topics under discussion.
65. Likewise, in the witness box, I found AP to be intelligent and commercially astute. Apart from being entirely fluent in English, he was highly articulate, and unfailingly charming and courteous. At times he was emotional about the fact that he had, as he saw it, been instrumental in the loss suffered by Springwell. But both in his long witness statements, and in cross-examination, he had a marked tendency to argue his case, rather than give evidence, and to put a spin on documents, and shift his ground, or change his evidence, when he perceived it to be advantageous to Springwell's case. He also had a tendency to take issue on matters which reflected badly on Springwell's case, even where he had no knowledge of the underlying evidence, or where the contemporaneous documentary evidence flatly contradicted his oral testimony.
66. On many occasions his oral evidence flatly contradicted his written statements. On other occasions he wildly elaborated the evidence in his original witness statements in a wholly unconvincing way. Much of AP's evidence was very vague and general in nature. Although this was not surprising, in some respects, given the passage of time, what was nonetheless notable was his apparent ability, when he thought it necessary to support his case, suddenly to give definitive evidence on matters on which he could not possibly have been in a position to do so. AP's evidence was also demonstrably untrue in some areas. Yet, when the untruth was pointed out, his usual reaction was not to accept his mistake, but rather to dissemble and to try to argue his way out of the problem. On other occasions, however, he frankly accepted in cross-examination evidential points that were wholly at odds with the evidence in his witness statements or with allegations made in Springwell's pleaded case.
67. In conclusion, I did not find AP to be a reliable witness. He gave the impression that he had convinced himself of the correctness of Springwell's case. The shifting nature of Springwell's factual case, and certain of its more exaggerated allegations, had to be laid at his door, which also reflected adversely on his credibility.

Credibility of JA as a witness

68. JA was cross-examined for ten days, so I also had a very good opportunity to assess his credibility. He was obviously an intelligent, articulate and highly competent salesman of emerging market instruments, who was able to deliver smooth and accomplished sales patter and information, in the course of his day to day trading. He clearly did not have the depth of knowledge, either of the market, or of economic or political issues, that was displayed by some of the expert witnesses. Indeed, at times he came over as somewhat superficial in his approach. He was somewhat reluctant to accept that his recommendations to AP could be characterised as advice, and in other areas somewhat unrealistically appeared to be toeing what he perceived to be the Chase party line.
69. It is plain that he and AP quickly developed a rapport and a personal friendship. Although JA had many other customers, including in particular many other customers within the Hellenic Group, the number of transactions undertaken by Springwell and the regularity of contact with AP meant that JA had very many dealings with AP.
70. The Polemises accused JA of dishonesty and fraud in December 1999, when they commenced the US proceedings. That claim was repeated when the Counterclaim in this action was served in 2004. What was said was that, at all times between October 1997 and August 1998, JA acted dishonestly in selling investments to AP which he knew were unsuitable. As I have described, that claim was not, in the event, proceeded with. However, Springwell also alleged against JA a parallel allegation that he acted in breach of fiduciary duty, in particular, in consciously taking advantage of AP, when selling instruments to Springwell between October 1997 and 1998. It was made clear in cross-examination that in fact this serious allegation of impropriety was still being pursued by Springwell.
71. Springwell also pursued the most wide-ranging allegations of negligence and negligent misrepresentation against JA, addressing and attacking at every level his competence as a salesman when dealing in large transactions with an important client. He was subjected to a very searching examination of his conduct, his approach, his integrity and his professionalism. His credibility as a witness has therefore to be considered in the context that he was defending his professional reputation.
72. However, all in all, I had no reason whatsoever to doubt his integrity, either as a witness or in his capacity as a salesman He presented throughout as an articulate individual, who approached his job with a high degree of professionalism. I did not regard him as unduly defensive, notwithstanding the pressure on him in the light of Springwell's allegations. I found him to be an honest witness who did not pretend to remember things when he clearly had no recollection.

Features of the relationship between the Polemis Group and Chase in the period 1974-1986

73. Before I turn to consider the relevant evidence relating to the three periods which I have identified, however, it is also relevant to sketch other features of the relationship in the period prior to the formation of Springwell, and before any duty of care is alleged to have arisen. I have already briefly referred to the Polemis Group's banking relationship with Chase in the years from 1974 to 1986. During the 1980s, the Polemis Group placed excess funds on time deposit with Chase and also with a variety of other banks (who offered better rates) such as Guinness Mahon, Bank of New York, the London branch of Banco do Brasil, RBS and Bank of America. Indeed the Polemis brothers maintained a relationship with Banco do Brasil for many years and purchased Petrobras bonds through this bank in 1993. Thus, whilst Chase was the principal bank with whom the Polemis Group maintained a banking relationship during this period, it was clearly able to, and to a certain extent did, maintain dealings with other banks.
74. In the mid-1980s the Polemis brothers were active traders in foreign exchange ("FX"). My finding is that their activity in the FX field was not limited to currency transactions entered into for the purposes of hedging currency exposures connected with the shipping business, but included transactions that had a pre-dominantly speculative purpose ( i.e. entered into for the purpose of making profits, rather than purely as an adjunct to a commercial transaction). AP was principally involved and it was mainly he who arranged the purchases, but SP was certainly aware of the currency activities and was involved himself in some FX speculation during 1985.
75. Chase extended a FX line of $ 22 million to the Polemis Group from at least 1982 to enable the Group to take delivery of foreign exchange contracts. This facility was fully cash collateralised by delivery of funds under the transactions. In addition, Chase held $ 3 million cash collateral as protection against the risk of foreign currency fluctuations under FX forward contracts entered into by the Polemis Group. An internal Chase SOAM dated 21 February 1983 recorded that the Polemis Group traded a FX volume of $ 383 million with Chase during 1982. Although SP's evidence was that the main reason for these activities was the shipping business's need for foreign currencies other than dollars, my conclusion is that, in fact, a substantial driver for the activity was profit generation. As Mr. Christoph Auer ("CA"), a junior relationship manager in the Chase Shipping department at the time (who subsequently, in 1987, became the relationship manager for the Polemis Group until early 1988), recalled, the Polemis Group's shipping business was largely dollar-based, so that the foreign exchange trading, certainly on the scale on which it was conducted, cannot be explained away as simply an exercise to hedge exposure that might have arisen as a result of the Group's shipping operations. Nor can it be explained away as a short period of temporary speculation as the FX speculation appears to have continued over the three-year period 1982 to 1985.
76. Thus, during the calendar year 1984, AP engaged in foreign exchange currency speculation, selling dollars in the forward markets and buying DM, Sterling and Yen. In any event, Chase appeared to have regarded these activities as speculation on the Polemis' part, since concern was recorded in a SOAM of 7 November 1984 as to the Polemis brothers' speculative tendencies as evidenced by these foreign exchange losses, with the comment that it was assumed however that:

"they will not continue to gamble in this way now that they are to have significant debt obligations, and now that profitability in the North Sea is less good".

77. It was estimated by Chase in the same SOAM (in the absence of any formal accounts) that the charters fixed by the Polemis Group in the early 1980s had netted the Group profits of approximately $ 20 million. Thus the FX losses of $ 7 million constituted 35% of those profits - a significant proportion.
78. During 1985, SP was noted to have traded "very successfully" in Deutschmarks on the FX markets in AP's absence, making estimated profits of $ 300,000. It was further recorded within Chase that the brothers' propensity to speculate in the FX market had not only resulted in a cash loss of $ 7.5 million in 1984 but had also exposed a side to their characters that Chase considered "diametrically opposite" to their conservative investment strategy in the shipping markets. By 1986, the brothers had, for whatever reason, ceased this foreign exchange speculation and their foreign exchange credit line was accordingly reduced from $ 25 million to $ 10 million. In late 1986, the Chase Shipping Department began to market interest rate swaps to its customers, including the Polemis Group, as protection against future increases in dollar interest rates on their shipping loans, but AP did not purchase any.
79. CA's recollection was that the Polemis brothers were the only client of Chase in the Hellenic group who, at that time was dealing in FX in those volumes. As CA stated in his oral evidence, which I accept, the FX trading in tens of millions of dollars at that date (more than 20 years ago) must be seen in the context of the ship repair loans which were measured at the time merely in hundreds of thousands of dollars. Further, the losses of over $ 7 million can be compared with the value of the entire fleet at the time, which was only about $ 49.2 million, and with the estimated liquidity of the Polemis Group, which, according to Chase, was some $ 25 million.
80. At the time the sums traded by way of speculation were significant, as were the losses sustained. The relevance of this evidence of these early FX transactions, conducted through Chase, is that it shows a clear willingness on the part of AP and SP, even at that early stage, to accept substantial risk, in the pursuit of profit, in the financial markets. It also shows a considerable financial sophistication on their part. It goes some way to undermine the suggestion, put forward as part of Springwell's case, that Chase knew the Polemis brothers to be totally risk averse and conservative in their investment dealings, and were unsophisticated when it came to dealings in the financial markets. Historically, that was not the picture that had been presented to Chase.

(i) The evidence relating to the introduction of JA to Springwell in December 1987 or March 1988 and to the early trading period from 1987-1990

The introduction of AP to JA

81. From the time that he became Head of Greek Shipping in the early 1980s, EM had been extremely successful in marketing Chase to Greek ship-owing customers based in London. As a result, Chase became the London bank of choice for important members of the London-based Greek shipping community. By 1984, the Polemis Group was a well-established customer of CMB. CA was the relationship manager at the time, although EM maintained the primary relationship with the Hellenic customers. In 1986 Springwell was holding its cash surplus from the Polemis shipping business on time deposits with Chase. Its accounts were held within the Shipping Department at CMB. As of 21 November 1986, these amounted to $ 15 million, but they had been as high as $ 20.9 million in July 1986.
82. EM explained in his evidence that he saw a business advantage to Chase in identifying cash management equivalents which were more attractive and competitive than the money market, for promotion to various members of the Hellenic Group (namely Greek shipping companies who were clients of Chase), which tended to have substantial funds derived from their shipping activities kept in cash or on time deposit. ECP was identified by the shipping department as a suitable alternative to cash for members of the Hellenic Group. ECP at the time consisted of debt instruments issued in the international money markets by companies with good credit ratings to finance their short-term credit needs. Chase had seen that, because its deposit rates were not particularly competitive, Hellenic Group customers had moved their money deposits elsewhere. Selling ECP to clients would therefore allow them to invest in instruments at higher rates than deposit rates.
83. Not surprisingly, since the relevant events occurred over 20 years ago, AP, JA, EM and CA were all, in my judgment, extremely vague about the circumstances in which JA came to be introduced to AP as the salesman who would be selling ECP to Springwell. AP attempted to "firm up" his recollections in his oral evidence, but I found this attempt to be unconvincing and self-serving. As is normal, the contemporaneous documentary records provide the most reliable guide to what actually happened.
84. CA's memorandum of 7 December 1987 recorded that he had met with AP on that day, principally to update the Shipping Department's information in advance of the annual review of the Polemis Group. Another purpose was recorded as:

"to introduce Adam Polemis to Euro Commercial Paper (ECP) as an alternative investment vehicle to the group's traditional short-term bank deposits …."

and that this ECP idea was:

"… received very positively, and a week from today the writer will call Adam again so as to make the necessary introductions to the ECP sales team[s]^[33].

CA was reasonably confident in his recollection that he would have told AP that he would put him in touch with the ECP "sales desk" but it is unlikely that he introduced JA to AP.

85. In his witness statement, AP said the following:

"I do not now recall when precisely that proposed meeting took place, but to the best of my recollection, I met with [EM] and [JA] at my office in London in late 1987. [EM] introduced [JA] as someone from his "team" (that was the word he used on many occasions) who could provide advice to Springwell for alternatives to time deposits where a better return might be obtained".

In his oral evidence, however, AP revealed a much more limited recollection; he said:

"Yes, well, I am of the impression that I met Justin with [EM] and not with Chris Auer, but here it says that Chris Auer had come to my office and so on. But he did not at that time introduce me to Justin. So I was introduced to Justin shortly thereafter and maybe it was in a meeting with [EM]".^[34]

86. In his first witness statement, AP stated that EM presented JA as part of his team and as someone who could provide advice to Springwell for alternative investments to time deposits and that:

"In my discussions with Van [EM] at and following this introduction, he was explicit as to what Justin would be doing. He would be providing advice on alternatives to time deposits. Van also made it clear that Justin was part of his "team" and that he would be supervising Justin to ensure that such advice as he gave was in accordance with what Van understood to be our requirements. Only suitable investments would be offered. So, my clear understanding of what was being offered to me by Van was an advisory service from Justin, supervised by Van. Without the service being offered, we would not have moved from keeping money on time deposit to any form of investment. It was only on the basis that Springwell was being offered an advisory service, supervised by Van, that I accepted the proposal to make investments."^[35]

87. AP was cross-examined at some length by Mr. Hapgood about what was said by EM at the time the latter introduced him to JA. AP said as follows:

"Q. What I am trying to understand is what skills or expertise did you understand that Mr Van Mellis would be able to apply in performing any kind of supervisory function.

A. I understood that the products would be -- first would be -- before they would be offered to me, they would be shown to the shipping department. Now, how would the shipping department be getting information about the suitability of these products or not, I was not aware, but there was -- maybe they had some contact with New York, the bosses of Justin, or whatever. I don't know.

The important thing is that I was the client of shipping and it was shipping that asked me to stop putting my money on time deposit, which was -- I was not very happy with the rates and to buy this paper and assured me that this would be filtered.

Now if it was going to be done by the shipping people, I assume that shipping people would not be 100 per cent the suitable people to do that, but within the Chase family they would be able to do whatever it was required. But it was definitely -- they were not going to be offered to me first. They were going to be shown to shipping before being offered to us. ^[36]"

There were other passages to similar effect.

88. EM gave evidence on behalf of Springwell. Apart from his business relationship with AP whilst EM was with Chase, EM had also been on social terms with AP in London, dining and playing tennis with him on a regular basis. He came to give evidence reluctantly, in somewhat unusual circumstances which are not necessary to rehearse, but which cast considerable doubt on the reliability of some of the evidence which he gave in his witness statement. He was obviously, on the one hand, keen to help Springwell and AP; but, on the other hand, apparently keen not to offend Chase, his former employers, which went some way to explain his initial reluctance to attend court to give evidence. I found him to be an unsatisfactory witness whose evidence was vague and confused, and shifted during the course of the trial. At times he was evasive. His evidence was often directly contradicted by what others said. He appeared to have wanted to use his witness statements as a means of brokering a settlement between Chase and Springwell. However, despite his concerns not to offend Chase, I formed the impression that he was prepared to shape his evidence in a manner that he thought might improve Springwell's case. Contrary to Mr Brindle's submissions, I would not characterise him as an independent witness.
89. In paragraph 13 of his second witness statement EM said that:

"I cannot now recall specifically how [JA] came to be presented to [AP] on behalf of Springwell… It may be that I introduced him to [AP], although I cannot recall. It is also possible that he was introduced to [AP] by [RC]. … However, he was introduced as someone who would be giving advice as to suitable investments".

At paragraph 14 he confirmed that he had

"… made it clear to [AP] that I would be supervising the investment activity and that [JA] would only be offering investments which I regarded as appropriate for Springwell, i.e. good quality liquid paper".

He went on to state (paragraph 16) that, after the start of direct dealings between JA and AP, he continued to monitor and supervise what was going on and held himself out as doing so. He said he did this because he regarded Chase's role as a fiduciary role which involved, inter alia:

"… looking after the interests of the customer and ensuring that the customer did not do anything which was not in its own interests which involved conducting thorough due diligence on investments to ensure that they were appropriate."

90. But, in cross-examination, EM accepted that he had no recollection at all of the circumstances of JA's introduction to AP. He did not support the case that JA was presented as, or that he was considered to be, part of "the Hellenic Team" or part of EM's own team. He said that he regarded JA (as indeed he was) as part of the Capital Markets Group.
91. JA (again, not surprisingly) could not remember his actual introduction to AP, although he specifically recalled that he did not physically meet AP face-to-face until some time in early 1988, despite the fact that he had been dealing with AP for some time before that in connection with Springwell's 1987 purchases. He said that he had often tried to meet AP, but that AP was always too busy; JA's recollection was that the introduction was made in the first instance on the telephone, with JA only physically meeting AP some time later, after trading had started; that the introduction would have involved a member of the Shipping Department; and that he would have been introduced as a member of the sales team, who would be able to source the investment products which Springwell wished to buy.
92. JA was clear that he would not have been introduced as any form of investment advisor, because that is not what he was, and he was sure that he was never introduced in such terms. His evidence was that he could not recollect whether he would have been introduced as a member of the "team", but thought that it was unlikely that anyone would have said that he was subject to EM's supervision or control, because he was not. However, he accepted that it was not impossible that he was introduced as part of "the client team" or even as part of the Hellenic group. He also accepted that it was possible that in his, JA's, absence, EM had described him to AP as someone who would be giving advice as to suitable investments, or that EM had told Springwell (and other clients) that he had a supervisory role over JA's activities.

Conclusion as to whether CMB or CIBL owed the alleged duties of care as a result of the circumstances surrounding the introduction of JA to AP

93. My conclusion on the entirety of the evidence (which was far more extensive than the selected passages which I have quoted above) relating to the introduction of JA to AP in late 1987/early 1988, and the period of early trading, is that it goes nowhere near to establishing Springwell's pleaded or argued case that CMB or CIBL had a contractual or tortious obligation to give general investment advice to Springwell in the extensive terms pleaded, as a result of the circumstances of the introduction of AP to JA, or as a result of what may have been said at that time.
94. I deal first with the allegation that Springwell was told that JA would be acting as an investment advisor.
95. Whatever may have been said in their witness statements, it was obvious to me that, in reality, neither AP nor EM could reliably remember much, if anything, about the circumstances of the introduction. Moreover, it was clear that the introduction was not considered by the parties at the time to be a defining moment in their relationship when their legal rights and liabilities would be articulated or established. This is supported by the absence of any written memorandum recording the introduction, let alone any written advisory agreement. I accept JA's evidence that the probability is that the introduction in the first instance was effected over the telephone.
96. I do not accept AP's and EM's evidence that JA was introduced, or described, in terms such as: "an investment advisor"; "someone who would be giving advice to Springwell generally about suitable investments"; or as someone who would be giving the type of extensive advice to Springwell which is pleaded in the RADC. There was no need or wish on the part of Springwell at the time of the introduction to equip itself with such an investment advisor. The Polemises were experienced and sophisticated businessmen. They had dealt for many years with Chase without (even on Springwell's case) ever having had an "advisory relationship" for any other purpose. Thus, for example, they had speculated extensively in foreign exchange without considering that they needed an advisor. They had placed their money on time deposit without considering that they needed an advisor.
97. As Mr. Hapgood submitted, in my judgment the introduction of ECP was simply one of a number of marketing attempts which CMB had regularly submitted to Springwell, by which it sought to interest them in alternative investment products. These marketing efforts were directed through the Shipping Department, both before and after the introduction of ECP. ECP was, in fact, a relatively benign product, which was being presented as an alternative, but akin to, time deposits. There was absolutely nothing in those circumstances to make Springwell consider that it suddenly needed, or to cause Chase to consider that it was suddenly being asked to provide, general investment advice.
98. In a telling passage in his oral evidence, AP described the background as follows:

"Then what happened was through my relation with other banks, I was transferring from time to time money from Chase to the other banks, getting a better rate on my time deposits. That is what they identified and they approached me and said: 'Look, you know, we can offer you another product that will give you better returns than time deposit, which will be equally -- would save and will serve you as good as the time deposits'. That is how it all started^[37]".

In my judgment, that description accurately reflects the true nature of the introduction of JA to Springwell.

99. Even if one accepts, which I am prepared to do, that EM may well have said something to AP along the lines that JA would be "advising" Springwell as to "appropriate or suitable investments to buy", that cannot, in my judgment be characterised, in the particular context, as anything approaching the assumption of a contractual or common law responsibility by CMB, let alone by CIBL, to give extensive general advice in the terms, or of the nature, pleaded or asserted in this action. Anything that was said was far too uncertain to form the basis of a contract for the provision of investment advice. The notion that Springwell was providing consideration by changing from investing in time deposits, to purchases of ECP, thereby affording CMB and CIBL the opportunity to earn commission or profit on the sales price of paper sold is highly artificial.
100. The context was that CMB was providing an alternative investment to time deposits, by affording Hellenic investors the opportunity to buy ECP products through CIBL. JA was, and I so find, introduced to AP (probably by EM) as the salesman who was going to be selling ECP to Springwell. In the course of that selling activity, no doubt, it was anticipated that JA would be making recommendations and, in that sense, "advising" AP what to buy and, no doubt, informing him of the prices and details of the assets within that class which were available. Indeed, I find as a fact that he did make such recommendations, or give such advice, during this early period of selling ECP to Springwell.
101. In his evidence, AP frankly and consistently admitted that he knew that JA was separate from the Shipping Department and the Private Bank; that he knew that JA's focus was on a limited asset class; and that he knew that JA's role was a salesman of that asset class. In other words, AP knew very well, at the start of the trading relationship between Springwell and CIBL, that JA was not an investment advisor, but a salesman, first of ECP and subsequently of emerging markets paper. As he said:

"So he was a salesman with regards to the fact that I would not be calling the Private Bank, who would be calling the salesman, who would be talking to the traders in order for the information to come back to me and say 'yes/no', so in that respect I would call him direct.^[38]"

To that effect Justin was introduced to sell this paper to us, but everything would be done under the auspices of the shipping department and everything would be filtered through them and the appropriateness of the investments and so on. So that continued until 1990.^[39]"

102. In relation to the allegations that that JA's role changed over time, AP in his oral evidence suggested that, whilst he had begun as a salesman, JA in some way changed into an investment advisor in the later years. Thus, for example, he said, that:

"So in 1988 he was a salesman; in 1996 or 1997 or 1998 he was much more than a salesman".^[40]

This was wholly inconsistent with the assertion that originally JA had been introduced as a full-scale investment advisor.

103. AP also confirmed in his oral evidence at trial that he fully appreciated that JA worked for the Investment Bank (i.e. CIBL) and was nothing to do with either the Shipping Department or the Private Bank. This evidence was directly inconsistent with the pleaded case, in which Springwell had averred that CMB had held JA out to AP as its "employee"^[41]. AP also knew, and I so find, that, from 1990, when JA moved to CIBL's London Debt Arbitrage Group (later the Global Emerging Markets Group, and then the International Fixed Income Group, but which was referred to at trial, and I shall refer to, as "IFI"), his focus was in the emerging markets, and that that was the paper that he was then selling.^[42] The fact that AP knew all along that JA was a salesman of emerging markets paper was also apparent from the note of a subsequent meeting with AP on 15 March 1995 in which RC recorded AP's statement:

"He now wished to consider a reduction in his higher risk portfolio but had no one to talk to. He said that he was well served by Justin Atkinson on the Emerging Markets but that no-one at Chase was there to meet his current needs on the lower risk investments".

The evidence given by AP at trial reflected and endorsed the statements recorded in that note.

104. My conclusion from this evidence is that, right from the start, JA was understood by AP to be a salesman of a limited asset class. JA was not, as a result of the circumstances of his introduction, regarded as an investment advisor, at least in the early years, in the sense pleaded in the RADC. At one stage AP, correctly in my view, drew an analogy with a shop assistant.

"I said that our interests were coincided. One was giving a product and the other was buying the product.

So it is the same thing like -- if I go to a shop to buy a suit, I do not consider before I enter the shop if, because they are selling me a suit, they are on the other side of the fence and I have to sort of, you know, invent some strategy how I am going to buy that suit. We were both benefiting out of this relationship^[43]."

105. I accept Springwell's submission that, even at this early stage, and as JA himself accepted, JA was not acting as an "execution only" salesman, in the sense of merely executing the trade and not giving advice, notwithstanding the allegations to such effect in Chase's pleaded case. A number of Chase's other witnesses also made the same point, albeit in relation to a later period; one such witness was Katherine O'Donnell ("KOD") who worked for Chase IFI (New York), was Head of Emerging Markets from 1987 to 1992, Head of IFI from 1992 to 1994, and Co-Head of Global Markets from 1994 to 1996.
106. I also conclude on the evidence, and despite JA's coyness in refusing to accept the point, that, in giving personal recommendations (as I find that he was doing even in this early period) about the merits of the various products that he was offering, or his views as to their relative value as compared with comparable securities, or as to whether Springwell should buy, sell or hold any particular investment,JA was indeed giving advice, and indeed investment advice – although for present purposes the word "investment" adds nothing of substance. As Carnwarth J (as he then was) held in Re Market Wizard Systems^[44] at paragraph 34:

"… guidance as to the course of action which the [client] should take in relation to the buying or selling of investments … in the ordinary use of English, is 'advice on the merits' of purchasing those investments. It matters not that the user is free to follow or disregard the advice; nor that he may receive further advice from his broker before making a final decision."

107. But even if the word "advice" or "advisor" was used by EM in the context of his introduction of JA, it could not reasonably have been understood by AP – at least at this early stage - as creating an ongoing advisory relationship of the extensive nature alleged by Springwell, whether with CIBL or with CMB. All that Springwell was being offered, through AP being given access to JA, was the provision of an alternative product to time deposits. Moreover, such personal recommendations, or advice, as AP was being given by JA – at least at this early stage – about the products that CIBL, by JA, was offering to sell (mainly ECP), has to be viewed, in my judgment, as no more than the recommendations of a trader to a buyer as to what was available, on what terms, and perhaps also as to the respective merits of the products on offer, given the requirements of the particular client. It well be that, theoretically, in such circumstances, a low level duty of care would arise on the part of the salesman not to make any negligent misstatements, or even to use reasonable care not to recommend a highly risky investment without pointing out that it was such, but a low level duty along those lines is worlds away from the wide duty of care that was pleaded or relied upon as having arisen at this early stage. In Mr. Brindle's words, it was at the lower end of the spectrum. Thus the notion that, in the context of the trading relationship at this early stage, as a result of the manner in which JA was introduced to AP, CIBL and/or CMB, by JA had either an obligation to ascertain Springwell's investment criteria, or to give wide ranging advice, for example, about portfolio diversification or concentration issues, or in relation to the general composition of the portfolio as a whole, is one that, in my judgment, simply does not reflect the reality of the position.
108. I also conclude that (irrespective of what was allegedly said about the function of JA) CMB did not assume any direct contractual or tortious obligation to advise Springwell about appropriate investments in the terms pleaded, either under the terms of the banking contract between CMB and Springwell concluded in 1986 (when Springwell first became a customer of CMB) or, alternatively, arising out of the alleged statement by EM that CMB would carry out a supervisory and monitoring role, through the Shipping Department.
109. In my judgment, there was nothing in the relationship of banker and customer per se between the CMB Shipping Department and Springwell, originating in 1986, that could be said to have given rise to such a relationship. As I have already said, there was nothing in the express terms of Springwell's opening account documentation that could give rise to the existence of any contractual obligation to advise as to appropriate investments in the manner alleged. Nor, in my judgment, was there anything in the incidents of that banking relationship that could be said impliedly to give rise to such a duty.
110. I heard expert evidence from two private bankers: Mr. Thomas Dicker, on behalf of Springwell; and Mr. Alan Saunders, on behalf of Chase, as to the role of a private bank. However, their evidence was only of very limited value to the current issue, not only because the alleged advisory relationship was said to have arisen when Springwell was a client of CMB's Shipping Department, rather than of CMB's Private Bank unit, but also because both experts accepted that, whether an advisory relationship existed in any one case, was ultimately a matter of fact depending on the particular circumstances of the case and what particular services had been offered to the customer. The evidence, not surprisingly, showed that there was no universal regime, and that different banks did things differently. Moreover, it was also apparent from Mr. Saunders' evidence, which I accept, that, in the late 1980s, the private banking sector was undeveloped in the UK, and that many changes have been made since then, imposing stricter regulatory requirements.
111. Nor, in my judgment, did anything that might have been said to AP by EM at the time of JA's introduction to AP, to the effect that EM and the Shipping Department would be monitoring and supervising JA's activities, give rise to a contractual or common law duty of care on the part of CMB to advise Springwell in the wide terms pleaded as to appropriate investments and the structure of its portfolio.
112. Springwell's case, as developed during the course of the trial from its pleaded case^[45], appears to be that, even if AP dealt directly with JA, as a salesman, AP's belief was that everything that JA did was being reviewed and monitored by the Shipping Department, and subsequently the Private Bank; thus that all products which JA presented to AP had been approved, vetted and implicitly advised upon by the Shipping Department (and subsequently the Private Bank), both prior to being, and after having been, purchased by Springwell. On this basis, Springwell sought to argue that, notwithstanding the fact that JA was just a salesman, AP should at all times have been in receipt of investment advice from the Shipping Department, and subsequently the Private Bank, and accordingly CMB owed Springwell the full range of duties of care pleaded .
113. This was the case that AP sought to develop in his oral evidence. I have already quoted above some passages from the witness statements and oral evidence: the following examples of what Springwell contended were the representations made by EM at the time of the introduction of JA, give a further flavour of the case:

"I had an excellent thing going on. I was running Springwell by myself, as far as putting the rubber stamp on the decisions, but I mean I had Justin and the whole Chase behind him with all the information. I had the original arrangements that we had put in place with Mr Mellis, then at the shipping department and later on in the Private Bank, whereby they would be filtering this information and the right kind of bonds or securities or investments would be coming to us".^[46]

"To that effect Justin was introduced to sell this paper to us, but everything would be done under the auspices of the shipping department and everything would be filtered through them and the appropriateness of the investments and so on".^[47]

"But just to conclude, the Chase shipping and then private banking continued in the same fashion to monitor these investments".^[48]

"Then I will tell that you my understanding, not from these documents but from the agreement that I had with Mellis and the shipping department, was that the products that would be offered to us would be filtered through the shipping department before being offered. So although I had direct telephone communication with Justin, that did not mean that he did not, previous to his conversation with me -- had not checked these products with the others. That is what I thought. So although this might not be correct, my understanding was that -- exactly what it says here".^[49]

"Q. Did you really think that the shipping department was discussing with Justin, before he sold you say Pemex, whether Pemex was suitable for Springwell?

A. Yes. By this time now, it is the Private Bank. So even more so, because now we have a specialised -- Private Bank is, you know, concentrating on the Hellenic clients, so there is definitely more concentration now than there was before in the shipping department".^[50]

"The arrangement was done with Mellis, so it was Mellis who would tell Justin what was the appropriate investments for Springwell".^[51] (My emphasis)

114. I do not accept AP's evidence to the effect that EM had told him, at the time of the introduction of AP to JA, or indeed at any later stage during EM's time at CMB, that the products that were to be offered to Springwell would be filtered through the shipping department before being offered to AP, and would be monitored and checked by the Shipping Department, prior to being offered to AP, for their suitability for Springwell's portfolio. Nor do I accept that he was told by EM that EM himself would suggest to JA what investments were suitable for Springwell's portfolio or that the Shipping Department were checking that "the right kind of bonds or securities or investments would be coming" to Springwell. I find that description of the role alleged to be played by the Shipping Department to be exaggerated and an after the event attempt by AP to present Springwell's case in the most favourable light.
115. I do accept, however, that, on the balance of probabilities, at or about the time of the introduction to JA or thereafter, EM may well have made some statement of a vague general nature to AP along the lines that EM or the Shipping Department would be monitoring, or keeping an eye on, the purchases which had been made through JA for their suitability.
116. The reasons that I find that a general statement along these lines may well have been made by EM are as follows. First, EM was described by several of the Chase witnesses as having a very hands-on, possessive attitude to his Hellenic clients. As JA said in cross-examination

"[EM] was very possessive of his relationships and would like to have been in the middle of everything that was going on at all times with all of his clients."^[52]

Other witnesses made similar comments. The evidence also showed that EM was very keen to ensure that he, and the Shipping Department, retained the benefit, for their own remuneration purposes, in respect of their notional share of any income generated for Chase in respect of Springwell's purchases. For that reason, and no doubt from a personal status point of view, given his long social acquaintance with AP, and the sort of person EM was, EM would have wanted to convey the impression to AP that he, EM, remained in charge, was keeping in touch and remained the principal relationship contact for AP within Chase. Moreover, EM, as the person notionally responsible for Chase's exposure to the client, whether simply as counterparty to a sale and purchase transaction, or, subsequently, when EM moved to the Private Bank and AP started leveraging Springwell's purchases, as a provider of credit facilities, would have necessarily wanted, at least at a general level, to know what investments Springwell had indeed purchased. This would have been important, in the interests of CMB, for general banking purposes: i.e. for marketing purposes, for reporting purposes, for the purposes of building up a picture of assets, subsequently (when the purchases were leveraged) for CMB's own credit control purposes, and, more generally, because a relationship manager would have been interested in what its client was doing. To this extent, and in a very loose sense, the investments could be said to have been monitored or supervised by the Shipping Department.

117. Moreover, at this stage, in 1988, the Shipping Department was still responsible for managing the Springwell relationship and RC had assumed the role of relationship manager to the Polemis Group. RC's evidence was to the effect that JA informed RC and EM from time to time of what AP was buying, or had bought, via internal reports. RC did not know what was going on in relation to the detailed workings of the relationship between Springwell and the ECP desk, but he did receive notification of the purchases of ECP that had actually been made. This, in my judgment, was entirely consistent with the role which I have described in the previous paragraph.
118. But, whatever AP may have been told about the wealth management services that CMB could provide to members of the Hellenic Group, or the so-called monitoring role of the Shipping Department, I reject the evidence of AP in so far as it sought to suggest that, at the start of the Springwell's trading through JA, anything that was said by EM (or indeed anyone else) at the time of AP's introduction to JA, led AP to believe that Springwell was in fact being offered a full, or general, investment advisory service, or a "wealth management service" (whether as pleaded, or more limited in nature), through the "auspices of the Shipping Department", simply on condition that it changed from investing in time deposits to investing in ECP through JA. I also reject the suggestion that anything that AP was told about the role of the Shipping Department, could have led him to believe that Springwell's purchases were being vetted or filtered in advance by the Shipping Department, or that CMB was thereby assuming a responsibility to advise Springwell in relation to such investments, in the terms pleaded. I conclude that much of AP's evidence was an attempt, ex post facto, to bolster Springwell's case in circumstances where the contemporaneous evidence, both as to AP's own conduct and that of Chase, both at the time following the introduction to JA, and, indeed, when EM subsequently moved to the Private Bank, is inconsistent with any such analysis.
119. My reasons for this conclusion, apart from the general views which I have already expressed about the credibility of AP and EM as witnesses, may be shortly summarised as follows.
120. First, AP's recollection of the circumstances of the introduction of JA (not surprisingly, as it was over 20 years ago) was, as I have already found, extremely weak. I consider it highly unlikely that he would have had any better, more specific recollection of some other meetings or discussions. Moreover, his evidence, both written and oral, as to these alleged representations went considerably further than Springwell's pleaded case at paragraph 100 of the RADC, which to me indicated some flavour of unreliability. It was also, in important respects, contradicted by EM's evidence.
121. Second, EM's evidence about the alleged monitoring and supervisory function was confused. Despite what he had said in his witness statement, in cross-examination he emphatically contradicted Springwell's case that there had been an agreement at the outset that EM would be supervising Springwell's purchases through JA in advance of their actually being made or that that was his function in the period whilst he was head of the Shipping Department, and before he moved to the Private Bank. EM was adamant that he would not have been supervising the purchase of ECP. He emphasised that he had far more important things to do by way of managing CMB's substantial credit exposures to other shipping clients and "getting money into the bank", rather than supervising the FX and other transactions of shipping clients, such as Springwell, which did not, during this period, have open credit lines with CMB.^[53]
122. Third, the high water-mark of Springwell's case on this issue was an annual review SOAM (an internal CMB memorandum) dated 17 January 1990. In that document, RC (Vice-President in the Shipping Department at the relevant time, and relationship manager for the Polemis Group from 1988), whilst recording that Chase had generated income of over $ 1 million from its business with Springwell in 1989, stated:

"The reason why the asset sale income is so high is that the brothers are less risk averse than other [ship] owners and are willing to invest in such short term paper as Nafinsa (Mexican) and Banco de Brasil and take subparticipations in loans to such borrowers as Maxwell Communications and News International. Their exposure to any one particular issuer is closely monitored and all new investment opportunities are discussed with the Shipping Division in detail before being offered to the client.

Note: the sale by the Bank of $ 5 million worth of 12 month Banco de Brasil securities was conditional upon the group investing $ 5 million from the proceeds of a maturing deposit with the Banco de Brasil, thereby not increasing the group's overall exposure". [My emphasis]

However, as explained by RC in cross-examination, this reflected only his own view that EM sought to exercise a general supervisory interest in the Hellenic Group.^[54] He said as follows:

"Q. So you seem to be reporting quite a close involvement of the shipping division in this investment activity.

A. It was certainly correct, my Lady, that my understanding was that Van Mellis was closely involved in the type of paper that was being sold to the SL Polemis Group.

MRS JUSTICE GLOSTER: What do you mean by 'closely involved' there?

A. I think that he would have -- he was very protective, I think for very good reasons, of his clients in that he wanted to ensure that they were sold appropriate products. But then again he also wanted to ensure that if there was a large amount of income generated by the bank, that he got his fair share of that. But I wouldn't like to think that it was entirely mercenary. He also wanted to make sure that the investments made sense. So that is why I think Van was -- certainly during the early period was closely involved.

MR. BRINDLE: When you say 'investments made sense', would you agree "and were suitable for the client"?

A. I'm sure that Van had that in mind.

Q. Just in a sense looking ahead, because you were there for the whole time, were Mr Mellis' successors somewhat less concerned to carry out this activity you have just been describing than he was or did they do it much the same? I mean Mr Ferrazzi and then Mr Gager.

A. Well, both Marco Ferrazzi and Stewart Gager were extremely capable. I would not have expected them to have done a more lax job than Van.

Q. From what you could see going on, from your vantage point, did they adopt the same approach as Mr Mellis to the question of monitoring of this -- of course it becomes emerging markets rather than ECP from 1989.

A. I certainly would have thought that in the early days Van would have been much more closely involved than probably even he was when he got more comfortable with Justin as an individual and with the type of investments that he was selling.

So he would have taken probably a slightly -- he would have stepped back and little and taken a more supervisory position, I would have thought. It is that sort of supervisory position I think that was followed by Marco Ferrazzi and Stewart Gager in my opinion."

123. However, this description was not based on any actual knowledge on the part of RC of what EM was in fact doing.^[55] Furthermore, it was not based upon what was actually happening in the Shipping Department. Significantly, there is not a single reference in any of the numerous other documents disclosed by Chase, which suggests that either EM, or anyone else in the Shipping Department, was telling JA what to buy for Springwell, or discussing in advance with JA, whether in detail, or otherwise, new investment opportunities, before they were offered to Springwell. Thus, other than the SOAM referred to above, there is no document within Chase which supports the existence of such a function being carried out by the Shipping Department. In my view, if there had indeed been such a function, it would have been documented and referred to. I conclude that no such function was being carried out.
124. Of course, I quite accept, as Mr. Brindle submitted, that the fact that the Shipping Department was not carrying out any such function, does not necessarily mean that AP was not told by EM that it was going to do so. However, it does, in my judgment, support the unlikelihood of any such representation being made to AP in the extensive terms pleaded.
125. The SOAM does, however, support my conclusion that some very general statement may well have been made by EM to AP to the effect that the Shipping Department would be casting some sort of supervisory eye over the investments purchased by JA after the event, to check their suitability for Springwell, irrespective of whether that in fact occurred or not.
126. Fourth, I conclude on the evidence that, during the relevant period from 1988 to 1990, AP never for one moment thought that he had the benefit of an investment advisory relationship with the Shipping Department. Thus, for example, AP never placed an order through EM, nor did he suggest that he ever discussed any individual product, let alone any question of the portfolio as a whole, with EM. There is no documentary record of any such discussion. That was not particularly surprising, since AP's contacts with EM were largely social. Nor did he remember ever having mentioning the supposed arrangement to RC, who became the relationship manager in early 1988. Never, at any stage during this period, did AP receive a single report, document, review, analysis or other evidence of this supposed supervisory and advisory function from the Shipping Department. He was never asked, and he certainly never asked, to identify Springwell's investment criteria. Thus, looked at in terms of the reliance factor, it is difficult to see what evidential basis there was to support any reasonable belief on the part of AP that the Shipping Department was exercising this alleged supervisory and advisory function in the extensive terms pleaded in the RADC. He knew that JA was the product specialist and that neither EM nor anyone else in the Shipping Department had particular knowledge about any product that was being offered. When AP was asked who it was he thought was undertaking this supposedly vital function, he was unable to give any coherent answer at all.
127. The contemporaneous documents show the Shipping Department, during this period, trying to market further products, to Springwell, beyond those which AP was buying through JA. Thus, for example, in early 1988, when RC took over from CA as relationship manager to the Polembros Group, a memorandum dated 31 March 1988 from RC to file, copied to EM, records that RC had met with both AP and SP at the Polemis Group's office on 10 March 1988. The purpose of the meeting was "to formally reintroduce" RC as the new Relationship Manager on the account and it is clear that the purpose of the meeting was to discuss all aspects of the banking relationship between Chase and the Polemis Group (including Springwell). Among other matters discussed, under the heading "Deposits", was the issue of participating deposits. RC recorded the discussion as follows:

"The writer raised the issue of "Participating Deposits" as an alternative to straight deposits but whilst Adam was interested, they felt they had found an even better alternative in ECP. They now have a direct contact with our ECP traders and have received at least LIBOR on their purchases to date."

The same document records, under the heading "Liability Hedging", that RC had been quoting AP on interest rate swaps and caps as a way of hedging their floating rate debt, but that AP did not feel the time was right. The memorandum also records, under the heading "New Loan Opportunities", that the brothers considered loan rates too high at 1%; that AP had pushed to retain the 5/8^th % spread on future loan business; and that RC had assured the Polemises that Chase would be as aggressive as possible in bidding for any future loan business. There is nothing which suggests that there was any discussion of Springwell's investment criteria or aims, the state of its portfolio, the need for diversification, or any of the other type of topics that one might have expected a new relationship manager would raise at his first meeting with clients who had the benefit of an investment advisory relationship with the Shipping Department in the terms alleged or even more limited terms.

128. Fifth, in any event, whatever general comment EM may have made to the effect that the Shipping Department would be supervising JA, or that he, EM, would be keeping an eye on things, that cannot reasonably be thought to have affected the legal responsibilities of the parties.
129. In the first place, from the contractual perspective, I find that anything that was said by EM was too vague and uncertain to form the basis for an investment advisory contract in the terms pleaded, or even in some modified, less onerous terms. There is no suggestion, for example, that CMB would be giving active investment advice to Springwell, or that CMB would be reviewing the portfolio as a whole, or advising on diversification. Second, it is difficult to find the evidential foundation for any duty of care being owed in tort in the extensive terms alleged or even more limited terms. It is not alleged by Springwell that the Shipping Department was, prior to any of these conversations, Springwell's investment advisor. JA was already subject to the supervision of his own superiors, as AP no doubt understood. Yet that did not create an advisory relationship. In my judgment, in the context of the relationship in 1987-1988, there is no reason why supervision by the Shipping Department (even if AP did make a general statement to the effect that the Shipping Department would be supervising JA's activities), nor a description of JA "as part of the team" (even if such an expression had been used), should make any difference or suddenly change the relationship into a full advisory one. Had AP wished for the benefit of an investment advisory service from the Shipping Department, (and, on the evidence, my conclusion is that, at that time, he did not) then that would have been a matter to resolve by contract. In the context of a formal banking relationship, Springwell could not, in my judgment, reasonably have obtained, or expected to have obtained, the benefit of such a service simply as a result informal chat between AP and EM. The absence of any written investment advisory agreement is, to my mind, a strong indicator against the existence of any contractual or tortious duty of care, notwithstanding that there was no regulatory requirement at that time for any such agreement to have been in writing for a client such as Springwell.
130. Finally, the contention that not only did JA have a duty of care, but also the Shipping Department had an obligation to supervise and control the alleged relationship, with its own distinct duty of care, is inconsistent with Springwell's pleaded case that EM knew that AP relied "entirely upon JA to advise him as to what investments were appropriate for Springwell…".^[56]
131. Accordingly, I conclude that whatever vague representation may have been made by EM to the effect that he/the Shipping Department would be monitoring and supervising JA's activities, that did not give rise to any contractual obligation or a common law duty of care on the part of CMB, whether by the Shipping Department, or otherwise, to advise Springwell in the wide terms pleaded as to appropriate investments and the structure of its portfolio.

(ii) The evidence relating to the period 1990 to April 1994, when EM left Chase

132. In this section I summarise the evidence which I regard as relevant to the Key Issue whether the relationship between the Private Bank and Springwell, during the period 1990 to April 1994, when EM left Chase, gave rise to the alleged or any duties of care on the part of CMB or CIBL, notwithstanding my conclusion, in the previous section of this judgment, that no duty of care arose as a result of the circumstances surrounding the introduction of JA to AP. Much of the evidence is also relevant to the Key Issue whether the relationship between the Private Bank and Springwell, during the period 1994 to 1998, gave rise to the alleged or any duties of care on the part of CMB, CIBL or CMIL.
133. Moreover, although I express certain findings on the evidence as I go along, my conclusions on the Key Issue as to whether a duty of care existed as at April 1994 are only stated in the section of this judgment following the end of the narrative dealing with the third period (1994 – 1998), as many of the factors relevant to the determination of the Issue in relation to both periods are, as I have already stated, common or at least overlap to a considerable extent.

The move of Springwell's account to the Private Bank

134. In early 1990, EM moved from Chase's Shipping Department to join Chase's Private Bank department in London. EM became the Head of the Hellenic Group within the Private Bank. In June 1990, EM invited FS to move across to the Private Bank to join him as EM's assistant. FS knew the Bank's London-based Greek customers and had worked for EM in the Shipping Department, and accordingly in August 1990, FS moved to the Private Bank as an assistant to EM. In 1990 those Hellenic customers whom the Bank thought might be interested in broadening their relationships beyond purely shipping (or who had already done so) were asked if they wished to move with EM to the Private Bank. If they did wish to do so, then the Private Bank took responsibility for the overall day-to-day administration of the customer's relationship with CMB. Thus, Springwell's account, along with those of several other Greek shipping customers, was moved from the Shipping Department to the Private Bank on or about 20 August 1990, when it appears that a Private Bank current account was opened for Springwell.
135. It was common ground between the parties that the move of Springwell's account from the Shipping Department to the Private Bank did not assume any particular significance for either party. Indeed AP's evidence was that the opening of the account with the Private Bank "did not seem important and was not treated as an important point by Chase". Thus Springwell contended in its written opening and closing submissions that:

"The investment advisory function was not affected by this move, nor was there any significant new documentation. It simply underlined that the service being provided was indeed a private banking service, as had been the case for more than three years. As the private banking experts agreed, private banks are concerned with the management of private wealth."

However, as I have already mentioned, despite what is stated in this passage, Springwell did not limit its argument to one seamless, unbroken advisory duty, stretching over the entire period; it also contended that, as the relationship developed, and by 1996, 1997, and/or 1998, Chase, by its various entities, in all the circumstances, assumed a responsibility to advise in the extensive terms pleaded.

136. CMB's Private Bank in London was based in the West End. By mid 1991, there was a small team of investment managers managing discretionary funds but that was in the process of being dismantled. Thereafter, discretionary investment management was run out of New York or Geneva. The investment management team accounted for 4 or 5 people. There were approximately 15 other people in the Private Bank in London who were not part of the discretionary investment management team. These consisted of some 6 or 7 Relationship Managers, some administrative assistants and some secretaries. Most of the Relationship Managers reported to unit heads in the Private Bank in Geneva and did not form part of the Hellenic Group under EM.

The wholesale counterparty regime

137. At all material times, CMB, CIBL and CMIL were (a) members of the SFA and authorised to conduct investment business under the 1986 Act; and (b) listed money market institutions under section 43 of the 1986 Act. As listed money market institutions, CMB, CIBL and CMIL were, pursuant to section 43 of the 1986 Act, exempted persons in respect of various transactions and various arrangements under Parts I, II and III of Schedule 5 to the 1986 Act. As such, in respect of such dealings, they were not subject to the SFA Rules, but were subject to the Grey Paper regime and the London Code of Conduct. However, if and to the extent that any transactions or dealings did not fall under the above regime, then CMB, CIBL and CMIL were subject to the rules of the SFA.
138. Under section 43 of the Financial Services Act 1986, certain transactions with listed money market institutions (wholesale counterparty transactions) were exempt from the provisions of the Act. Both CMB and CIBL were listed money market institutions. Listed money market institutions were regulated by the Bank of England in respect of this exempt business and were required to comply with the Grey Paper and the London Code of Conduct. The first versions of these were published in April 1988. At first, listed money market institutions were required to send notice to customers that certain transactions fell within the wholesale counterparty regime each time a transaction of that nature was entered into, to submit quarterly returns to the Bank of England of certain wholesale transactions and to maintain lists of wholesale counterparties. This was modified on 29 September 1989 to a requirement only to give periodic warnings and to maintain lists of wholesale counterparties.
139. In its opening and closing written submissions, Chase sought to rely upon a wholesale counterparty notice, which it contended had been sent in a letter to Springwell dated 22 March 1990, in which CIBL notified Springwell that, under the provisions of section 43 of the Financial Services Act 1986, CIBL had been accepted as a listed money market institution and that certain transactions with Springwell, as specified, would be exempt from the provisions of that Act. Thereafter, Springwell appeared with other clients in a "List of wholesale counterparties" maintained by CIBL. However, Springwell did not admit that it had ever received this document. Chase sought to contend that this wholesale counterparty notice significantly restricted the regulatory protection available to Springwell in respect of the transactions concerned, in particular by excluding the operation of the SFA rules. But the letter was not pleaded by Chase, was not relied upon in Chase's oral opening, was not cross-examined upon or referred to during the trial and was not relied upon in the Agreed List of Issues.
140. In those circumstances, I consider that it would be wrong for me to take the wholesale counterparty notice into account, and I do not propose to do so. In any event, Springwell was subsequently classified as a non-private customer, so the early wholesale counterparty classification, if it occurred, is of extremely limited relevance to the issues in dispute. That is not least because what is in issue is whether CMB or CIBL owed contractual or tortious duties care, rather than any regulatory obligations under the relevant legislation.

The growth of emerging markets trading in the 1990s

141. The following account of the growth of emerging markets trading in the 1990s is largely taken from the description in appendix 13 to the first report of Alexandra McLeod-Wilson, Chase's expert in the debt of emerging market countries. As she described, the market in Less Developed Country ("LDC") debt trading started in a small way in 1984, only a few years after the Latin American debt crisis of 1982. However, little progress was made on restructuring the underlying bank debts at this time and the market remained sporadic, with low levels of liquidity. The catalyst for change was the announcement in 1989 of a Brady Plan for Mexico, named after Treasury Secretary Nicholas Brady. In order to create a lasting restructuring, the Brady Plan incorporated three main elements: (a) debt forgiveness; (b) restructuring which was conditional upon a programme of economic reform; and (c) the transformation of debt from bank loans into new tradable instruments. During the 1990s, the Brady programme became used as a template for restructuring defaulted sovereign loans into bonds over the next eight years. LDC countries, which became known as "emerging markets", converted $ 160 billion of their defaulted debt into newly issued bonds. Each restructuring was slightly different. Mexico was followed shortly by Venezuela in 1991, then Argentina in 1993, Brazil and Poland in 1994, Ecuador and Bulgaria in 1995 and Russia in 1997, to name but the major countries. The issuance of a large pool of readily tradable Brady bonds prompted the growth of the investor base in emerging markets, with significant amounts of the debt being transferred from bank balance sheets to investment portfolios. The term "Brady bonds" came to be applied to restructured debt more widely (i.e. not only to debt issued under the Brady programme), as well as to uncollateralised bonds issued under a Brady programme. Brady restructurings opened the way for emerging markets countries, and corporates from within those countries, to access the international capital markets.
142. The number of emerging markets countries which were given a rating (which was nearly always sub-investment grade) by the international credit agencies rose from 11 in 1989 to 49 in 1996. Eurobond new issuance from emerging markets countries grew from $ 7.8 billion in 1990 to $ 133.2 billion in 1997.The volume of debt traded grew nearly tenfold during the period 1992 to 1997, from $ 734 billion in 1992 to almost $ 6 trillion by 1997. As volumes increased, so in general did liquidity and trading blocks.
143. So far as Chase was concerned, the expansion of the availability of different types of emerging markets debt generally was mirrored by a similar increase in sales of emerging markets paper by Chase to its customers as demand, particularly among the customers of the Private Bank Hellenic group, grew exponentially during the 1990s. The internal Private Bank memoranda from early 1991 record an exponential growth of the LDC client base and a concomitant increase in the Private Bank's income generated as a result of LDC sales. The LDC sales income was split as to 50/50 between IFI and the Private Bank, an arrangement about which EM frequently complained as being inequitable (on the grounds that the Private Bank administered the relationship with these clients) but which nonetheless continued to at least August 1998. The sale of LDC paper, over the relevant period, was extremely profitable for Chase.

JA's move to IFI, and the early expansion of Springwell's portfolio into emerging market investments

144. By the late 1980s, JA had started selling a wider range of credits, including debt instruments issued in LDC, but which subsequently became known as "emerging markets". This had brought him into contact with Nick Cournoyer ("NC"), who was Head of the London Debt Arbitrage Group in London until 1991, and part of Chase IFI in London. He reported to KOD. NC concentrated on selling emerging debt instruments, which was very much a nascent business at the time. In 1990, NC asked JA to join the London Debt Arbitrage Group, which was subsequently re-named the Developing Countries' Capital Markets Group ("the DCCM Group"), and then IFI, (as previously defined). JA moved to that group in July of that year and JA remained working at IFI thereafter at all relevant times. The move meant that he began to sell Springwell predominantly emerging markets debt, a more specialized asset class, in a market which, as I have already described, expanded rapidly in the 1990s.
145. Following his move to IFI in July 1990, JA sent a fax dated 6 July 1990 from his office at CIBL to AP and SP at Polembros Shipping, in which he stated:

"Adam Spyros: From my new position we have a slightly different confirmation format – please can you follow the instructions."

The instructions required that the confirmations be sent to CIBL London and CIBL New York. In fact SP responded to this fax and returned the signed confirmations on 6 July 1990 under cover of a fax to JA with confirmations duly signed as requested and faxed to both CIBL London and CIBL New York. This showed, as AP confirmed in an important passage in his evidence, that, from the date of JA's move to IFI in July 1990, AP knew that JA's focus was in the emerging markets, and that that was the paper, and the only paper, that he was selling:

"Q. You knew perfectly well, certainly by the mid-1990s, that Justin could only offer you emerging market paper because that was his job as a salesman for Chase in his then position?

A. Yes, Justin could offer me only the paper that -- within the department that he was working ….

Q. Are you able to give a 'yes' or 'no' answer to what seems to me to be a very straightforward question, that you were not looking to Mr Atkinson for advice about anything other than emerging market paper?

A. That is the only thing that he was selling so that is the only thing that we were discussing daily. I was -- he was giving me advice on emerging markets, emerging market paper, that is correct.

Q. So the answer to my question is 'yes'?

A. Yes, strictly on this specific question, yes".^[57]

146. Moreover the Polemises were well aware that JA was a salesman who who physically worked on the trading floor. When speaking to them on the telephone, JA would often break off to speak to a trader nearby on the floor, and, on at least one occasion,.
147. I find that, at IFI, JA continued to market emerging market instruments to AP, in much the same way as he had previously marketed ECP.
148. In his evidence, which in so far as it is set out below, I accept, JA described his role as a salesman and the process of marketing emerging market instruments generally, across the board to all his clients, as follows. (I make no distinction between the use of the word "client" and the word "customer" in this context, although Chase was prone to do so.)
149. He had a wide customer base with differing requirements. In order to be an effective salesman, it was important for him to try to understand each customer's own requirements, so that he could give them investment ideas or proposals which fitted with those requirements. Particularly as the emerging markets business expanded in the1990s, there were very many products which were potentially available. It was not in his interests, nor in his customers' interests, to offer products to his customers in which they would have no interest or which he did not think fitted their objectives. It was a very competitive environment, and customer contact was an integral part of the business. That necessitated a close evaluation of each customer's own objectives and preferences, and their risk profiles. He explained that an effective salesman would develop a very keen sense of his customers' preferences, as an ongoing process throughout the relationship, from the initial discussions, through to reaction to particular proposals and the feedback from particular transactions. He further explained that the need to understand a customer's objectives and preferences was fundamental to the role of salesman, because, if he, as a salesman in Chase, was unable properly to assess a customer's needs, and the customer became dissatisfied with what it had purchased, it would not be JA's customer for long, as there was always a host of other institutions in the City which could take his place. By proposing what he considered to be good investments which fitted with their objectives, he enabled his customers to make informed choices as to what they wanted, which, in the long run, was profitable for both his customers and for Chase. It was not always simply a matter of his presenting his ideas to customers; sometimes customers would also come to him asking for prices or availability on particular instruments. His role as a salesman was thus both pro-active and re-active.
150. In identifying buying opportunities for his customers, JA would source products in both the primary and secondary markets. On a new issue, if Chase (i.e. the Investment Bank) were the lead manager, the syndicate and capital markets teams at Chase who ran the transaction would usually give a presentation to the sales team to introduce the transaction, giving all details relating to its credit structure and size. So far as secondary market sales were concerned, the assets which JA sold to customers were either purchased by Chase's traders directly from the market or sold from the market-making book. Chase acted as a market maker in emerging market debt and had traders (called "flow traders") who operated a market-making book. These traders would typically buy and sell assets on a short term basis. JA would sometimes be aware of the assets on the market making book and could sell these on to his customers. Some traders would produce information sheets to be circulated around the sales team, such as corporate or sovereign "Axe" sheets, which contained details of particular holdings which were available to be sold, or which the trader wanted to buy. Similarly, JA would also be aware of the prices in the market itself, as he had access to the market prices on the screens on the trading floor. If an asset was not on the market-making book, JA could always obtain a specific price from one of the flow traders for an acquisition directly from the market. In such a case, the trader would purchase the asset and JA would simultaneously sell the asset on to his customer.
151. There was a distinction between the market-making book and the proprietary book. The market-making book was comprised of short term positions operated by the flow traders for the purpose of making a market. The proprietary book was different. Chase as an institution also made investments on its own behalf and this included investments in emerging markets debt. The proprietary traders were entirely separate from the flow traders and from the salesmen, They purchased and sold investments on Chase's behalf, in the pursuit of whatever long term or other strategy had been determined by those responsible for Chase's own investment management.
152. JA did not know the composition of the proprietary book at any given time. Proprietary trading was run as a separate business. He was generally interested to glean what the proprietary traders were doing, as such information might be relevant for the purpose of his own proposals to customers, but this was not information which was made available to him as a matter of course. He would pick up information on a thematic basis, that the proprietary traders were going long or short in a particular country, or perhaps that they were interested in a particular bond. But the proprietary book was a different business with which he was not involved.
153. In addition to knowing what was available in the emerging market and at what price, a key part of JA's job was to inform himself about the markets, so that he was able to identify opportunities for his customers. As already explained, new issues in which Chase was involved would be introduced to the sales team by those running the transaction. This would typically involve a presentation, during which the salient aspects of the issue would be explained and salesmen would be given the opportunity to ask questions. They would also be provided with the relevant documents to enable them to understand (and in due course to market) the products, such as the information memoranda, the term sheets and the prospectuses. Otherwise, it was a matter of JA's staying close to the market and keeping updated on relevant developments. There were various sources of information which JA would make use of.
154. This included substantial amounts of in-house research produced by Chase about the emerging markets. IFI had a dedicated Research Group based in New York and London, which was a separate division within the Investment Bank and prepared daily, weekly and monthly research reports, which included all aspects of the emerging markets, both for internal use and for external distribution to customers. The research provided information on the political and economic climate in the emerging market countries as well as information on specific bonds. JA would read this research to gain information about the markets. He would also keep up to date with developments in the financial press, in particular the Wall Street Journal and the Financial Times.
155. In addition to the documentary material which JA read, there was also a regular flow of communication and exchange of ideas within the trading floor in London and within IFI as a whole. Every morning, the sales staff, the flow traders and the researchers would have a meeting, to share market information and monitor trade ideas. In the afternoon, JA would commonly participate in a telephone conference call with traders, researchers and the sales teams in London and New York. The calls were led by the head of the Research Group and during them the various teams would provide updates on market developments, sales and new issues. In addition to the morning and afternoon meetings, the sales staff, traders and researchers communicated frequently throughout, exchanging prices and market information. The trading floor at Chase was an open plan room. JA sat next to his fellow sales staff and in close proximity to the flow traders and the researchers. In later years, relevant information was also exchanged with IFI through Bloomberg's messaging services.
156. JA's method of operating was as follows: he conducted business with his customers mostly over the telephone although he would also meet them face to face, normally at the customer's offices. The frequency of his contact with a customer depended on the customer's needs and the sort of relationship they had. Some customers preferred to contact JA rather than for him to call them.
157. His normal practice was to identify opportunities for his customers, whether in the primary market or the secondary market and whether this was to buy, sell or switch assets. These would be opportunities which JA considered the customer would be interested in, given its preferences and objectives. Once he had done this, he would fax the customer with my ideas. If these were buying opportunities, he would generally set out the instrument's issuer, its yield, risk-rating (if available) and its maturity date. If available, he would then attach the relevant information memoranda and/or updates for each investment mentioned on the coversheet. If they were selling or switching opportunities, he would give the customer brief details of why he thought it was a good idea. If he were proposing a switch into a new instrument with which the customer was unfamiliar, he would include such relevant documentary information as was available.
158. In addition to these faxes, and in relation to new issues, it was also JA's practice to send out to his customers, in advance, the hard copy information which was available. He would obtain multiple copes of presentations about new issues and would be provided with the relevant documentation, such as the prospectus, the information memorandum and/or the term sheet. He would, as a matter of course, send them out to his customers. The prospectuses and other materials were professionally prepared documents, which contained the relevant information about the investment products and their terms. The sending out of this documentation was, so far as JA was concerned, an important element of the marketing of the investments. He would have, literally, a stack of prospectuses and, as a matter of routine, he would mail them to his customers. When he then spoke to his customers, normally on the telephone, JA would generally discuss the ideas which he had already included in the preceding fax. The purpose of the fax was to enable the customer to see in black and white what it was that he was proposing and to read the documentation which was included. The customer would then often already have decided whether or not it wished to proceed with one or more of the ideas before they spoke. It might also have questions which JA would seek to answer, if he could. He would also be able to obtain an up-to-the-minute price from one of the traders, which he would then pass on to the customer. If the customer decided to proceed, the deal would be agreed there and then on the telephone.
159. JA's practice was not, however, in any way rigid. Whilst he would commonly seek to present ideas by fax and then follow that up by telephone, there were many other exchanges during the day, depending on the wishes of the customer and the circumstances at the time. Customers would telephone JA to originate deals, or ask for prices or other information. Equally, there did not have to be a fax on every occasion before JA would telephone customers. For example, if there was a relevant development in the market, he would, as a matter of course, telephone his customers and inform them of it. And, even when the call did follow a fax, the conversation might range beyond the particular ideas which he had included. The sending out of a fax was a useful sales tool, which enabled the customer to give some consideration in advance to the ideas, but it was only part of his day to day conduct as a salesman for Chase. The selling of emerging markets investments was a dynamic process, which involved meeting customers' differing requirements, often at times of fast-moving market events. There was therefore no easily defined pattern to how JA went about his job.
160. He spent large parts of the day on the telephone talking to customers. The conversations varied depending on what the customer wanted and on the circumstances at the time but the overall context was the same throughout: he was the Chase salesman and the customer was interested or potentially interested in buying assets from JA or in selling assets to him. They would talk about particular products, about countries, about markets and about relevant developments. Many of his conversations would concern factual matters: such as prices, terms, market developments and the like. Many of JA's customers also wanted to know what he thought, for instance about particular products or countries, or about how JA or Chase thought that the market would move, or what were the best opportunities at any particular time. JA would pass on his view or whatever the Chase house view was at the time.
161. Accordingly, for example, if JA included in a fax two investments in a particular country, and a customer wanted to buy one of them, it might ask him which of the two he preferred. He might say that he preferred investment A over investment B because it had a better credit risk, or a better yield for the same credit risk, or a shorter or longer maturity. Or if a customer wanted to diversify into different countries, he might say that he thought that country A had greater potential than country B. He did not make decisions for the customers. They would decide, having heard his opinion, what to do. The emerging markets business was awash with opinions. Chase would produce research documents, which were regularly sent out to customers. These contained the views of researchers on precisely the same matters (i.e. products, countries and markets). Other investment banks would produce their own research publications and there also many different views expressed in the financial press. Customers would also be able to tap into the views of the other salesmen and the traders at Chase and their counterparts at the other investment banks. Many people involved in the market had views, often differing views, but it was the customers who decided what they wanted to do.
162. JA's day to day dealings with AP were not appreciably different from his day to day dealings with other customers. Thus, although he and JA met from time to time, their dealings were generally conducted over the telephone. As with his other customers, JA would send to the Polemises faxes with investment opportunities and associated documentation. He would also have sent out to them, hard copy prospectuses or other such documentation as a matter of course. Although he did not retain the faxes which he sent to his customers, examples in the evidence supported his account. The fax would then have led to a discussion on the telephone and AP would have decided whether he wished to go ahead with one or more of the proposals, whether he did not, or whether he wanted to consider the matter further. Particularly in the latter years, JA tended to speak frequently with AP, and, in general, their conversations on the telephone were similar in content to the conversations which JA had with other customers. There would be a telephone call, either from AP ringing up to see what JA had on offer, or from JA to AP, informing the latter of what was available. JA would describe the securities available, they would talk about developments in the market, about prices, about particular bonds and about anything else which was relevant to the buying and selling of the investments. JA would, if he thought it appropriate, give his views, for example on whether he thought a particular bond was a good buy for Springwell, or a good sell, whether it might pay to wait, whether the price might go up or down, or whether there was likely value in any particular country. In discussing the relevant terms and merits of investments with AP and making recommendations, JA was, I conclude, in one sense, giving advice, although the legal consequences of him so doing in relation to this period, I consider below.
163. I find as a fact that, in Springwell's case, one notable feature of JA's dealings with AP, was that a critical driver of Springwell's investment objectives was the desire to be fully invested, and to be fully invested in emerging markets – and, if possible, to increase the size of those investments with leverage.AP emphasised that he did not wish for his funds to be held on deposit but wanted them invested, where the returns were greater. He frequently asked JA for prices and availability of emerging markets investments and he sought to prevail upon JA to source more and more investments of the type in which he was interested. This was particularly the case with GKOs. On occasions he complained that Springwell was not investing "aggressively" and, indeed, that JA was not giving him enough ideas or showing him enough emerging markets investments. What this meant in practice was that AP rarely had to make the decision whether, in principle, Springwell should or should not make investments. Nor did he have to decide whether, in principle, Springwell should make further investments in the emerging markets. (Of course, whether, Chase should have advised him that those were decisions Springwell should have been making, is one of the issues in this litigation.)
164. Thus the issue during most of JA's conversations with JA tended to be whether there was an asset available with a sufficiently high yield, or at a sufficiently low price, to be of interest to them. Or, if there were two such assets, whether Springwell would buy one or other, or both, of them, and, if so, in what quantity.
165. JA kept his own record of Springwell's investments, which he used to keep track of up-coming maturities and the portfolio's make-up. He kept such records for all of his customers, not just Springwell. He regarded this as part of his job as a salesman, because it was useful to have the information at his fingertips so that he could best assess what suggestions to put to his customers. In Springwell's case it was of particular use, because of its desire always to be fully invested.

Springwell's early IMAs

166. In 1990, EM recommended to AP that Springwell should open a Chase Investment Management Account ("IMA"), which were accounts where the funds were invested in a range of assets, and managed on a discretionary basis (at that stage by managers in the Private Bank in London), in accordance with the broad investment objective specified by each customer on its application form at the time that the IMA was established. The strategies available to customers were "conservative", "balanced" or "aggressive". In October 1990 Springwell invested an initial $ 5, and, in November 1990, a further $ 5 million was invested. There was a quarterly management fee of .05% on the whole portfolio and Springwell's investment objectives were stated as "Balanced". Regular monthly portfolio statements were supplied to Springwell, showing the performance of the portfolio and details of the investments contained in it. In addition, the IMA relationship manager, would pay quarterly visits to the customer, usually together with the portfolio manager, to report on the performance of the customer's IMA. Springwell invested a further $ 20 million in a IMA with the New York branch of CMB in November 1991, which was the subject of a formal Corporate Investment Management Agreement, which likewise provided for management fees and portfolio statements. It gave wide discretionary powers to CMB to invest and included a hold harmless provision in the following terms:

"General

Your [i.e. CMB's] duties and responsibilities are as set forth in this Agreement. We will hold you harmless from all liability, loss and expense arising in connection with our account provided you have tried to carry out this Agreement in good faith. You will not be responsible for the acts, omissions or solvency of any broker or agent selected by you in good faith to effect any transaction for our account. Your authority under this Agreement shall continue notwithstanding our insolvency, bankruptcy or other legal disability and we hereby agreed to hold you harmless from all liability, loss and expense arising as a consequence of any action taken or omitted to be taken by you are any such event and prior to receipt by your Investment Management Division of action knowledge of such event."

167. The impression which I gained from the oral and documentary evidence was that AP opened these early IMAs as a "gesture of goodwill" or "as a courtesy" to Chase, because AP wished to oblige the principals of the Private Bank on each occasion, rather than because he took the issue of diversification seriously or wished to have a more balanced mix of assets in his portfolio.
168. The fact that EM made such a recommendation to Springwell to open an IMA was not, in my judgment, the discharge of any pre-existing obligation to advise Springwell as to its investments, or to diversify. I would characterise it rather as the marketing of a particular product by the Private Bank to a customer.

Petrobras and the introduction of leverage to Springwell's portfolio

169. On 2 August 1991, the Brazilian state oil company, Petrobras, issued a $ 250 million callable Eurobond, due on 2 August 1993. Chase was the lead manager on the issue. Springwell purchased a substantial tranche of $ 40 million of the Petrobras paper (approximately 16% of the issue) using a $ 15 million loan facility from the Private Bank, secured on investment grade assets, to do so ("the Investment Grade Facility"). The facility was secured on the existing $ 10,300,000 IMA which was at that time held in, and managed by the Private Bank in London, and also secured on securities held by CIBL. The secured credit facility letter ("the Facility letter") and the memorandum of deposit ("the Memorandum of Deposit") were both signed on 30 July 1991 by SP. He signed the Memorandum of Deposit in two places, his second signature acknowledging that Chase had advised him to take independent legal advice regarding the contents and effect of the Memorandum of Deposit. This was Springwell's first leveraged purchase of emerging markets investments.
170. The relevance of Springwell's purchase of Petrobras paper is threefold:

i) first, Springwell alleges that:

"… it is to be inferred … that JA's motive in recommending that Springwell should borrow money to purchase these bonds was that Springwell would be then be able to purchase a very significant participation in the issue and thereby assist Chase in its role as lead manager and underwriter of the issue."^[58] ;

thus, in essence, the allegation is that JA's motive was the sinister one of promoting and protecting Chase's position as underwriter, at the expense of JA's duty to the client;

ii) second, Springwell relies, in relation to this purchase of Petrobras paper, upon the evidence of its witness, Stavros Papadopoulos ("SPAP"), who was at this time an assistant to EM in the Private Bank in London, to support its case that the Private Bank had indeed put in place a system to monitor and check all purchases made by Springwell through JA, and had assumed a responsibility in contract or in tort to advise Springwell about appropriate investments in the terms pleaded; thus SPAP sought to suggest in his evidence that he was concerned that Springwell had been sold an inappropriately large proportion of the Petrobras issue and, as a result, had instituted and operated, during his time at Chase, a "system" under which sales made by JA to Hellenic customers had to be pre-approved by the Private Bank, and, in particular, that

"no deal could be finalised unless the Private Bank said that it was acceptable";

and

iii) third, Springwell relies upon the advice it alleged was given by JA to leverage the investment as support for its case that CMB/CIBL were providing investment advice in the terms pleaded through JA.

171. So far as the first allegation is concerned, I reject it. The evidence (which I do not need to rehearse in any detail) showed that the bond was very well received by the market, and substantially oversubscribed. JA had no need or incentive to act in any duplicitous way in order to assist Chase's role as lead underwriter. Many of the Hellenic clients bought substantial amounts of the Petrobras bond: in total perhaps 30 to 40% of the total issuance, no doubt partly because Petrobras was well known as a good credit risk in the wider Greek shipping community.
172. Springwell's Reply alleges that Springwell would not have been willing to invest in Petrobras, but for JA's recommendation.^[59] The evidence did not support that contention. The Polemis Group had had a long-standing relationship with Petrobras through the shipping business and had been shipping Petrobras oil around the world for many years. AP and SP knew a great deal about the company, Petrobras, and Brazil, through their business dealings and SP's family connections. I find that they were confident that Petrobras was a good credit risk. They were both extremely eager to acquire a large investment in the Petrobras issue, and ultimately were delighted to have purchased $ 40 million of the bond, using leverage to do so. Indeed they wanted to subscribe for more of the bond. This was not really disputed by AP in evidence. JA was away on honeymoon at the time of the Petrobras issue. Paul Charman ("PC") who was Head of Emerging Markets Group at IFI in London from 1992-1996 gave evidence that, whilst JA was away, AP rang the sales desk and PC had a short conversation with him,

"along the lines of [AP] wanting to buy a significant amount of the transaction"

and that AP conveyed the impression that he knew Petrobras very well. It was not clear from the evidence whether it was JA who first raised the possibility of leveraging Springwell's purchase of Petrobras, since he was away.

173. But, even accepting that it may well have been JA who suggested that, if AP wanted to buy more of the bond, he could borrow funds from Chase to do so, I find nothing significant in that, so far as either the first or the second allegations are concerned, to support Springwell's case. It was obvious from AP's oral evidence that AP understood the concept of leverage, and its correlative risks from his shipping experience and that he was extremely enthusiastic about the idea of obtaining leverage from Chase to purchase a larger proportion of the Petrobras, given that the cost of leverage was lower than the increased return on the asset that leverage produced.^[60]
174. Thus, in my judgment, the suggestion that that JA had ulterior motives in suggesting that Springwell should leverage the purchase of the Petrobras bonds (if he did so suggest) is wholly unsupported on the evidence. Nor, in my judgment, would the mere fact that JA suggested the idea of leverage (on the assumption that he did so) go any way to support the existence, at this time, of any advisory relationship in the terms pleaded. So I reject the first and the third allegations.
175. I turn now to deal with the second allegation in relation to Springwell's Petrobras purchase, namely that, because of SPAP's concern that Springwell had been sold an inappropriately large proportion of the Petrobras issue, SP established a system whereby all investments made by Springwell through JA had to pre-approved by the Private Bank and, in particular, whereby "no deal could be finalised unless the Private Bank said that it was acceptable". Springwell contended that the alleged relevance of this allegation was that it supported its case that CMB, by the Private Bank, had, and accepted that it had, a duty to monitor and supervise the investment activity conducted through JA, and to give advice, in the terms pleaded, as to appropriate investments to be made by Springwell. However,

i) it was not part of Springwell's case that this "system" formed part of the initial arrangements between the Shipping Department and Springwell (SPAP confirmed orally that no such system previously existed);^[61]

ii) SPAP did not allege that he had told Springwell of the existence of this system;

iii) AP did not give evidence that SPAP had told him of this system, nor that he was ever aware of it, let alone that he considered that it formed part of any dealings with Chase; and

iv) it was not alleged by SPAP that anybody continued this system after he had left in 1993.

176. According to his witness statement, SPAP is a Greek national, who was educated both in Greece and in the . On finishing his education, he joined Bank of New York ("BoNY") in New York in January 1980. There he was involved with trade finance. At the end of 1983, he came to London to set up a similar trade finance business for BoNY in London which enabled him to meet, or in many cases renew his acquaintance with, members of the Greek shipping community who were was based in London at that time. At about this time he first met AP socially and they started playing tennis together once a week. He also met SP socially. Although they were not particularly close in the mid-1980s, his friendship with AP, in particular, grew over time. In 1986/87 he used to organise lunches for members of the Greek shipping community at BoNY and they would also all regularly meet once a week at the Clermont Club in Mayfair. By virtue of his relationship with AP, Springwell opened an account with BoNY in about 1986, investing initially in time deposits and then in loan participations. SPAP also knew EM socially.
177. In 1991, after being made redundant by Bank of New York, SPAP was recruited by EM to work in the Private Bank. When SPAP moved from BoNY to CMB, Springwell closed its account at BoNY and transferred its funds at BoNY to CMB. Effectively, SPAP was recruited by Chase for the benefit of his contacts with the Greek shipping community, with a view to assisting EM in bringing new business into Chase from that community. SPAP began his employment on 3 June 1991. He worked as an assistant to EM and reported to him. Although described as a relationship manager, he was not the relationship manager for Springwell. He remained employed by CMB until June 1993, although he was working out of CMB's Piraeus office, in Greece, from March 1993 onwards. Such involvement as he may have had with Springwell occurred over a very short period of time and, certainly so far as AP was concerned, does not appear to have involved much interface between the two.
178. I did not find SPAP's evidence credible. I formed the impression that he was partisan towards Springwell's case. I found him to be extremely vague in some important respects (perhaps not surprisingly, given the passage of time) but then apparently able to recall other aspects with apparent, but unconvincing, certainty. He was not able to provide any proper explanation as to why the Petrobras purchase, of all Springwell's purchases, should have been considered inappropriate, given the strength of the quasi-sovereign issuer and the Polemis' long history and familiarity with Petrobras. I reject his evidence that he instituted and operated a system under which sales made by JA to Hellenic customers had to be pre-approved by the Private Bank. I conclude that he exaggerated the role of the Private Bank in the selling process.
179. My reasons doing so can be summarised as follows:

i) First, there was no Chase (or, indeed, Springwell) document referring to such a system, or giving any indication of its existence. If indeed there had been a system, whereby trades made through CIBL had to be cleared in advance with the Private Bank, it is inconceivable, in my judgment, that there would not have been some sort of record evidencing the matter. On the contrary, as already mentioned above, such documents as referred to the role of the Private Bank were to an entirely different effect and are inconsistent with the system alleged.

ii) Second, in his evidence, JA, who would have to have known if such a system was indeed operating, was emphatic that there was no such system. Nor did EM or any of JA's supervisors mention such a system. I prefer JA's evidence on this point to SPAP's.

iii) Third, I do not find SPAP's evidence, to the effect that he had been very surprised and concerned to learn of Springwell's purchase of Petrobras in August 1991, that he regarded it as "wholly inappropriate", and that was why he had set up the system, to be credible evidence. SPAP was the officer at the Private Bank in London, who signed the internal CMB form requesting the Private Bank's credit department in New York to grant the credit facility of $ 15 million which enabled Springwell to purchase so much of the Petrobras issue. Although, in his oral evidence, SPAP denied that he knew that the facility was intended to be used for the purchase of the Petrobras issue, I find it highly unlikely that, in circumstances where the proposal was dated 18 July 1991, and the actual purchase was on 2 August 1991, he would have made the facility request without having asked the client the purpose for which it was intended. Moreover, it is clear that SPAP knew about the intended Petrobras purchase at the time of the loan application, since, in a memorandum to EM dated 1 July 1991, he reported that "Springwell had committed a sizeable amount for Petrobras". This also undermines the assertion that he did not know the purpose of the facility. Moreover, SPAP's subsequent conduct was wholly inconsistent with any earlier concerns about the Petrobras purchase. For example, in a proposal for Springwell's initial margin forward facility of $ 40 million, dated 12 March 1992, he wrote that "During 1991 Springwell invested in $ 297MM (face value) of LDC paper and was one of the driving forces behind Chase's Petrobras deal by committing $ 40MM to the transaction." If he had genuinely considered that the original purchase was "wholly inappropriate", it is extremely unlikely that he would have relied on it in this way in support of a new credit facility. There were other examples of inconsistent conduct in the documents. Finally, if SPAP had had any real concerns, it is surprising that they were not shared by his superior, EM, who, the contemporaneous documents show, was delighted with the $ 71 million of Petrobras sales to Private Bank customers, such delight being tempered only by his regret that the Private Bank was not allocated a larger share of the income.

iv) Fourth, there was no commercial purpose in the Private Bank setting up a filtering system of the type alleged by SPAP. The expertise as regards the relevant investment products lay with CIBL. The Private Bank, and in particular SPAP, had no expertise in such products. EM and SPAP had no expertise in investment management for clients. It is therefore difficult to see what the utility would have been of a system whereby trades entered by CIBL should have been subject to a further layer of approval by SPAP or EM.

v) The subsequent evidence relating to the Investment Grade Facility (to which I refer below) does not support the existence of any such system as referred to by SPAP.

180. Accordingly, I conclude that the evidence relating to the Petrobras purchases does not assist Springwell's case.

The increase in the amount of the Investment Grade Facility and the documents passing between Springwell and Chase in connection therewith

181. After the Investment Grade Facility had been put in place to fund part of the Petrobras purchase, it was then, for a time, used regularly and increased periodically in order to leverage Springwell's emerging markets portfolio. However, when the Margin Forward Programme was created by the Private Bank credit department in April 1992, as another means of leveraging purchases of emerging markets assets, but with the security under the MFA, entered into between CIBL and Springwell, being the emerging markets assets themselves, rather than the investment grade assets, Springwell's use of the Investment Grade Facility declined as its use of the MFA facility increased. However, I find that AP's enthusiasm in the early days to increase Springwell's leverage under the Investment Grade Facility foreshadowed his desire for increased leverage under the subsequent the MFA facility.
182. The thrust of Springwell's case, as presented by AP in his evidence, is that, so far as AP was concerned, the increases in leverage occurred automatically as the portfolio expanded, that AP was not the instigator of the extension of the facilities or the increase in the advance rate^[62]; rather that the instigator was the Private Bank and JA, who were keen that the facilities should increase, so that more emerging markets product could be sold to Springwell, and Chase could thereby make more profits. However, the evidence, both documentary and oral, does not, support such an extreme case as AP sought to present. Although EM, at the Private Bank, clearly regarded Springwell as a source of substantial future profits and increased business, and, no doubt, was keen on these grounds to accommodate Springwell's desire for increased leverage, I conclude that AP himself was insistent that Chase should increase his leverage facilities on Springwell's investment grade credit line and increase the advance rate to 90% and that such increases were indeed sought at his instigation.
183. Springwell requested two consecutive increases to its investment grade facility, the first being a request to increase the facility from $ 15 million to $ 50 million in October 1991; and the second being a request to increase the facility from $ 50 million to $ 100 million in November 1991. The first request was approved by the Private Bank credit department in New York, with no difficulty, and the Facility letter of 30 July 1991 was amended by a letter dated 4 October 1991 and signed by AP on that date, increasing the secured credit facilities to be provided by Chase to Springwell from $ 15 million to $ 50 million.
184. In November 1991, Springwell applied for an extension of the investment grade facility from $ 50 million to $ 100 million and a higher advance rate from 85% to 90% of the purchase price of investment grade bonds. In support of the application, a Private Bank memorandum recorded that Springwell was "perhaps [the Private Bank's] most profitable account". The extension of the facility to $ 100 million was granted. However, Gary Glick ("GG") (who worked at the New York office of the Private Bank, and was the Credit Officer for Europe and the Middle East, with day-to-day responsibility for credit decisions in relation to the Hellenic Group), who gave evidence at the trial and was a patently frank witness, whose evidence I accept, declined the application for a 90% advance rate in the following terms:

"I will not approve 90% advance rate on bonds. … I would consider 85% against A-rated bonds with 5 years or less maturity. I would also consider an advance of 80% against the net accrued interest (net of interest payable on our loans) of the bonds. If you wish to appeal, feel free to discuss with Barry Geller [GG's superior], but I think he is of the same mind on this."

Subsequently, on 20 November 1991, GG confirmed this 85% advance rate and an advance rate of up to 85% against net accrued interest of eligible bonds, provided that the Private Bank was able to monitor daily.

185. By a letter of 29 November 1991, signed by FS on behalf of the Private Bank and by AP on behalf of Springwell, Chase confirmed the revised terms of the secured credit facility thereby amending the facility letter of 4 October 1991 and increasing the credit limit under the facility to $ 100 million. A letter from CMB to CIBL dated 29 November 1991, signed by FS on behalf of CMB, and signed by JA on behalf of CIBL on 6 December 1991, confirmed the terms upon which the collateral securities held by CIBL would be held as nominees for CMB pursuant to the Memorandum of Deposit. AP signed an acknowledgment on 29 November 1991 on behalf of Springwell, to the effect that Springwell agreed to the terms of the letter and directed CIBL to act in accordance with its terms. A Board Resolution of Springwell dated 5 December 1991 and signed by SP recorded that the Facility letter of 29 November 1991 had been approved.
186. However, Springwell was not satisfied with an advance rate of only 85%, and renewed its application to increase the advance rate on investment grade assets from 85% to 90%. By a memo dated 29 November 1991 from EM to GG and his superiors, EM appealed in the following terms:

"I am requesting your approval to increase the percentage of advance in a $ 100MM facility against bonds to the subject. Presently, we have obtained an approval for an 85% advance against bonds with a risk rating of A or better. Springwell has demanded a 90% advance (as the competition offers) for dollar denominated collateral. For non- dollar denominated security there will be an additional 10% margin …". [My emphasis]

"The reasons why I am requesting your exceptional approval are as follows:

(a) The main principals of Springwell, the two Polemis brothers, are longstanding clients of Chase on the corporate as well as the private side. In fact, this name has been an almost exclusive client of Chase for more than 30 years. To the best of my knowledge, The Chase Manhattan Bank is handling the bulk of the brothers' corporate and private business, including $ 30MM in two IMA type accounts, making this name the most profitable Greek relationship for the Bank. Indeed, for the first 10 months of 1991, Chase has earned in excess of $ 2.75MM in total income with 95% of this coming from non-loan products!!!

(b) The group as a whole has almost no leverage (except 350MM to Chose). In a fleet consisting of 34 vessels with an estimated market value in excess of 3250MM, there is only a $ 5.2MM loan to Chase that has an asset coverage in excess of 600%! The majority of the liquidity of the group, which is in excess of 3300MM, has been invested with Chase in the form of $ 150MM of LDC paper, $ 56MM in investment grade securities and $ 6MM in time deposits. The remainder is in T/D's with other banks. The LDC paper is in the form of CD's, short-dated Eurobonds and Brady type Eurobonds. 60% of this paper has less than one year tenor and 40% has a two year average tenor. … The investment grade portfolio has an average life of 2½ years, all of it (except Chase's subordinated debt) is presently available as collateral for the existing bond borrowing facility. The Bank does not advance any monies against the LDC paper (the competition such as the major Swiss banks lend against this type of collateral at a 75% margin). Likewise, the Bank is not lending against the $ 8MM Chase subordinated paper bought by the client …. All these securities are in custody with Chase.

(c) The group generates cash flow in excess of $ 20MM on a monthly basis which is primarily invested in various types of instruments through Chase. Hence, any potential shortfall in the proposed $ 100MM facility could be provided by the group's cash flow generated from the trading of the vessels well as from the LDC paper maturing at various times.

(d) It is my guesstimate that the two brothers have also at least another $ 100MM in T/D's with various other banks. I estimate that half of this could be with an LDC type of bank due to the fact that the brothers have had a longstanding and extremely profitable relationship with Petrobras over the years.

In summary, this is a name which is extremely liquid with a net worth in excess of $ 500MM and total debt of only $ 50MM. The bulk of the groups business is done through Chase and, for all intents and purposes, Chase is the group's main Bank. The bulk of the group's liquidity is with Chase. The movement of funds is done through Chase. The safekeeping of the securities is with Chase. Therefore, although the recommended 10% margin might be an insufficient level of cushion in a similar borrowing situation and, in particular, in a low interest rate scenario as the present one is, clearly, the Bank should feel very comfortable to consider an exception in its policy. This is due to the fact that Chase, in general terms, has total control on the group's assets. Furthermore, due to the fact that the competition, mainly the major Swiss banks us well as Morgan and Citibank, have made serious efforts recently to make inroads into these kinds of groups, it is imperative to consider making exceptions to our credit policies for certain situations. In fact, we know that Swiss Banking Corporation has offered a credit facility for similar types of securities with a margin of 10% to a well-known name in the Greek shipping community. What is of even more concern, about this facility is not only the fact that the spread is ¼% versus our ½%, but our competitor is also advancing 25% against LDC paper type of collateral.

Finally, the brothers had dinner with Jim Zeigon, Georges Vergnion and Fernando Moura a month ago. During that dinner, Jim promised Polemis his personal assistance should there be a need. As a gesture of goodwill, the Polemis brothers recently opened a $ 20MM IMA account in New York. Should your response to this request to decrease the margin to 10% be negative, Polemis has told the writer that he will call Zeigon personally to demand an explanation. Polemis is extremely upset about our position and has used other arguments as well such as the excess collateral he maintains in the shipping loan… From my point of view, the relationship is the cornerstone of our Private Banking/Shipping strategy. We must appear flexible in this situation if we do not want to make it easier for formidable competition such as the Swiss banks and Morgan to break into our relationships…."

EM also recorded in a Hellenic Team Highlights memorandum dated 4 December 1991 that the result of Chase declining Springwell's request for an increased percentage of advance rate from 85% to 90% was "a very displeased customer".

187. It was clear from GG's evidence that there had been considerable urgency in this request and that severe pressure had been put by AP on the Private Bank to obtain approval. That this was so had made a particular impression on GG because his father had just died, but he was nonetheless telephoned, whilst away from the office, as a matter of extreme urgency by Benoit Struye ("BS") (who was the Credit Manager at the Private Bank in London) and FS to persuade him to change his mind. They told GG that the client was insisting on getting higher leverage on his IMA and that they were under substantial pressure from the client. GG told the court that this had set the tone for his future dealings with Springwell's requests. I have no doubt that AP did indeed bring pressure to bear to obtain more favourable terms in relation to the lower downpayment on leveraged investment grade paper. In the event, GG and the Private Bank credit department did agree to reduce Springwell's downpayment on its investment grade assets from 20% to 10%, so that Springwell achieved its requested 90% advance rate on the purchase price of investment grade bonds.
188. However, the approval was conditional, qualified and subject to a trial period of six months. It appears from the subsequent correspondence that the conditions proposed were unacceptable to AP, and that, accordingly, EM went back to GG to argue for more favourable terms on behalf of Springwell. Revised conditions were finally approved by GG and the New York Credit Department on 18 December 1991 subject to the facility being reviewed after three months and subject to requirements for documentation and internal controls being put in place to monitor the margin position and the pledge of the IMA collateral. A facility letter dated 20 December 1991 from Chase to Springwell, signed by FS for Chase and by AP for Springwell (on 23 December 1991), confirmed the $ 100 million credit limit and set out the terms and conditions for the facility, including the various margin maintenance rates and the close out rates which differed depending on the type of security being considered. By a further memo dated 30 December 1991, GG set out his instructions in relation to the monitoring of the Springwell account and put the burden on the Private Bank, London (with the assistance of London Sales) to ensure that it stayed within the guidelines in relation to collateral and margin maintenance, rather than the Private Bank in New York who had control of the IMA collateral. In order to facilitate this, GG gave instructions for the New York IMA unit to send portfolio reports daily to the Private Bank London, which, in turn, was to prepare a collateral control report on the total Springwell position which would be sent to GG in New York daily. In addition, a full report was to be sent to GG once a week. By 6 February 1992 $ 69 million of the $ 100 million facility approved in December 1991 had already been drawn by Springwell. A memorandum dated 13 April 1992 from SPAP recorded how the arrangement for monitoring the temporary 90% advance rates for Springwell was working well and recommended it continue for another year, stating that:

"Springwell continues to be our most important and profitable relationship".

189. This and other evidence clearly showed, that, insofar as EM and the Private Bank were exercising a monitoring role in relation to the suitability of Springwell's purchases, they were doing so in the context of discharging the credit control functions of the Private Bank, and not in the context of an investment advisory relationship. This was a point that EM repeatedly emphasized in his oral evidence. Thus for example he stated:

"So I had the credibility with the credit process and I had to advise the credit process – the credit officers to give me approvals for the credit lines. So I had to know what kind of paper we sell to those investors."^[63]

…

"I introduced the investors to Mr Atkinson. Mr Atkinson had guidelines what to do, lines approved by the bank. Any violations of those lines, they had to be re-approved again by the credit process, by the bank… Now after I introduced the customers to Mr Atkinson, perhaps you know there were things that he was doing that I didn't know about, but the understanding was that he should discuss all these things with me. That was the understanding because I was taking the credit risk, and the bank was counting on me to protect the interests of the bank, okay, to make sure that things were done within the guidelines. That is how banks operate."^[64]

Likewise, when asked to confirm that he was satisfied that emerging markets paper was a suitable type of asset class for Springwell, he said

"Yes, absolutely, within the guidelines, though, within the guidelines. That is very important."

When asked to which guidelines he referred, he replied:

"A. I'm referring to the percentage of advance and I am referring to whether it is spot paper and I'm referring to geography and I'm referring to the lines, the size of the lines. "^[65]

…

"A. Sir, the way the process works is a guy who is responsible for the credit exposure on a name picks up the phone and talks to the credit officer and they discuss together the credit limits because it is the relationship manager that knows the credit capability of the customer. The credit officer is going to ask, 'Okay, is Polemis good for 20 million?' He does not know if Polemis is good for 20 million or 10 million or 50 million. I have to tell them. Then he is going to ask me the next question, 'What kind of advance shall we give him?' He might say '50 per cent' and I say, 'No, I do not think 50 per cent is -- it is too high, 50 per cent'. He might say 'Why?', 'Because, you know, I am not sure how he is going to react, he is trading for the first time' -- I am talking about the beginning of the trading relationship; okay? So this discussion is taking place between the relationship manager -- that is why the relationship manager signs first. Do you see any credit memo without a relationship manager's signature?

Q. No. Exactly.

A. It starts, and if something goes wrong, actually it should be the head of the credit officer because he approved the $ 200 million exposure for a particular name. But it is the head of the little guy, the relationship manager.

Q. Yes, what I am taking issue with you about is the way you have described this because plainly, if you are going to offer leverage, there have to be credit limits both per individual client and for the group collectively.

A. Yes."^[66]

...

"A. Yes, I mean there was a good relationship between Mr Atkinson and myself… There was friction? Of course there was friction. His job was to sell paper, my job was to accept the credit risk. What is wrong with that?"^[67]

190. Other documents, which set out the role of the Private Bank officials within the credit process, support this analysis. The role did not involve any role in the selling process itself. The role was more limited, involving the provision of funds for completion and the monitoring of collateral values for credit purposes. I refer in particular to the Memorandum from BS dated 6 August 1992 (with its attached programme) and the special conditions for Springwell's credit approval in September 1992. Accordingly, I regard the evidence of EM and SPAP, to the extent that they sought to suggest that, during this period, the Private Bank was acting as an investment advisor to Springwell, or discharging investment advisory responsibilities to the latter, because the Private Bank operated as a "filter" on sales to Hellenic Group customers, as exaggerated and incorrect.

Confirmations under the Investment Grade Facility

191. I should also refer to the fact that transactions under the Investment Grade Facility were the subject of written confirmations ("confirms"). Those confirms contained statements purporting to confirm that the investment had been purchased on an execution only basis and without the receipt of advice from CIBL. AP stated in evidence that they were sent to him by fax, and that he signed them and returned them. There were numerous of them in evidence. Thus, for example, Chase sent to Springwell a confirmation dated 9 December 1991 in respect of the sale of $ 5 million of Brazil zero coupon ECP. On the second page of the document, above the signature of AP as "Accepted and confirmed", are the following terms:

"2. CIBL hereby advises you that CIBL is a member of the [SFA] and is regulated by SFA with respect to the transaction specified above… CIBL further advises you that with respect to the Transaction, any charges made reflect the fact that it was effected upon an execution-only basis, without CIBL having given or being requested or expected to give advice about the investment merits of the Transaction.

3. CIBL makes no representation or warranty concerning the Bonds, or the financial condition of the Issuer or the performance or observance by the Issuer of its obligations under the Bonds."

192. Mr. Hapgood relied upon these confirms in support of his argument that, whatever may have been said at the time of JA's introduction to AP, and even if JA's oral recommendations to AP in the course of their discussions before Springwell's purchase of emerging markets debt amounted to advice, by the time that Springwell was receiving these confirms from Chase, it must have been absolutely clear to Springwell, that either (a) it was not in fact receiving any advice from Chase in respect of the investment merits of the relevant transactions, or (b) it was contracting on the agreed basis that it was not receiving any such advice. It is not necessary for me to decide what the effect (if any) of these particular confirms were, as they were not relied upon in Chase's pleaded case, since they do not relate to any of the transactions which form part of Springwell's claim. There are, however, part of the chronology relevant for an analysis of the relationship between Chase and Springwell

The introduction of the Margin Forward Programme and the Margin Forward Agreement

193. In early 1992 Chase developed a margin forward programme ("the Margin Forward Programme") in relation to emerging market investments (in the internal documentation often referred to as "LDC paper") which enabled the purchaser to leverage against the security of the emerging market debt instrument which it was seeking to purchase, rather than (as previously, under the Investment Grade Facility) against the security of other assets, that were required to be of investment grade quality. The programme was developed in a context where Chase's competitors were providing a similar dedicated product for the provision of leverage on emerging markets assets, governed by the terms of a margin forward agreement, and were targeting Chase's Hellenic group customers who, at that stage, were permitted to leverage emerging markets investments only under the Investment Grade Facility. It was clear from the evidence that EM and others in his team at the Private Bank were very keen for this programme to be instituted, not only because it would meet the Private Bank's concerns about the severe encroaching competition, but also because the provision of leverage under the programme would generate additional income for the Private Bank.
194. Under the terms of a Margin Forward Agreement ("MFA"), customers agreed to purchase emerging markets securities from Chase forward, i.e. at a future date (the settlement date), but at the current spot price. The customer would pay a percentage of the purchase price of the instrument up front (the "haircut" or "downpayment") and the sale was effected only on the settlement date, when the customer paid the balance of the purchase price, together with the financing charge (or alternatively, agreed to rollover the financing and thus continue the lending). The settlement date tended to be the next coupon date. At that point, CIBL would transfer title to the instrument to the customer.
195. The Margin Forward Programme was devised and implemented by GG, in Private Bank credit department, and his team. The eligibility requirements were carefully set out and circulated, so that only clients and instruments which satisfied the relevant criteria would be admitted to the programme. Only three, or four, of the Hellenic clients qualified initially, and Springwell was one of these. The detailed criteria for margin forward trading LDC paper were set out in The Chase Manhattan Private Bank Credit Guide, an internal guide for the Private Bank Credit department. This stipulated, amongst other things, what units within Chase could trade LDC paper with customers and what criteria customers had to meet in order to trade. It stated that all LDC paper for customer spot and forward purchases had to be approved for trading by the DCCM Group, with no exceptions. The Credit Guide also set out requirements as to the facilities allowed to customers, line monitoring requirements, margin calls and documentation requirements, as well as credit approval and credit reporting requirements.
196. The Margin Forward Programme operated as follows. Each customer within the Hellenic Group which traded under an MFA was allocated an individual approved credit line, up to which it was permitted to trade. This was a proportion of the Hellenic Group's overall allocation under the Margin Forward Programme. The permitted line up to which a customer was allowed to trade was pre-approved by the Private Bank credit department, and usually GG would give approval for a credit line after conversations, normally with FS, as to the amount of trading a particular Hellenic customer wished to do. Alternatively, and throughout the material time, it was always open to a customer to trade using cash. If the Hellenic group customers were up to their maximum overall allocation under the programme, then an increase for one customer could only be done if another customer within the Hellenic group took a smaller line, in order to keep overall limits within the allocation for the group. When the demand warranted it, an increase in the overall limit for the group might be sought to accommodate the increased trading.
197. The eligibility requirements for the Margin Forward Programme were strict. The evidence shows that it had been very carefully devised, and the criteria considered at the highest levels in the credit department, to allow only those of the required sophistication and experience to qualify to trade in emerging markets debt using the leverage under the MFA and engage in such "higher-risk transactions". A memorandum dated 10 March 1992 from GG, copied amongst others to EM, set out the programme's origins and the criteria for eligibility of both clients and paper as follows:

"Re: Proposed Program for Forward Sale of LDC Euro-Issues to Select European PBI Customers

Program Amount: $ 100 Million total value all outstanding forward sales under this program at any one time (Given downpayment requirements below, amount of credit exposure will be substantially less.) This program amount is dedicated to select European PBI customers. (An additional $ 50MM is contemplated for select Western Hemisphere PBI Customers under a different structure, which will have to be reviewed and approved by you separately.)

Purpose: For the last several years, the Developing Countries Capital Markets Group has successfully marketed LDC paper to the clients of the PBI Hellenic team. In 1991, $ 850MM was traded with these clients. As the market has matured, competitors (Swiss Banking Corp, Morgan, Citibank) have been offering extended terms of purchase. This proposal is an attempt to defend the Chase franchise in this area and also generate incremental income.

Description: This program is to cover forward contracts between Chase and client in which the client commits today to purchase pre-approved LDC assets at a specified future date. Downpayment is made up front with balance due upon delivery of asset on a future date…

Eligible Clients: This program is restricted to 4 select clients of the PBI Hellenic team …

All have sizeable wealth generated originally in the shipping business. Operations are conducted in the name of their Private Investment Corporations. The reviews indicate that all have the:

Experience and sophistication to engage in these higher-risk transactions

Financial capacity to meet their forward commitments under these transactions.

Inclusion of any new customers will require concurrence of John Nuzum/Jim Lewis for Private Banking.

Eligible Paper: All primary and secondary market new Euro-market issues made available by the DCCM Trading Group. Such issues will consist of bonds, notes and short-dated Euro-commercial paper and CD's. Any exceptions must be pre-approved by Kathy Galbraith/Anand Srinivasan of [DCCM] Group.

Specifically excluded is distressed sovereign bank debt which has not been converted into the above eligible instruments …."

198. A memorandum dated 10 March 1992, and signed by SPAP and EM on 12 March 1992, recorded the following information about Springwell in support of the application for the proposed margin forward facility of $ 40 million, noting the qualities of experience and ability to meet commitments which qualified Springwell as suitable in their view for the Margin Forward Programme:

"Proposed facility: $ 40MM

A client of Chase for over 20 years and the first PBI relationship to be invested in LDC paper over 4 years ago. Currently, Chase holds over $ 200MM in investments from the group. Shipping Division has also had a longstanding relationship.

During 1991 Springwell invested in $ 297MM (face value) of LDC paper and was one of the driving forces behind Chase's Petrobras deal by committing $ 40MM to the transaction.

We estimate that the group is worth in excess of $ 350MM in unencumbered liquid assets. They also operate a fleet of 30 ships, all debt-free.

Since August 1991, we commenced lending against investment grade securities under a secured credit line. In December we increased the facility to $ 100MM and at present $ 55MM is outstanding. At the end of March a review of our arrangements is due.

January 1992 AUM: $ 43MM."

GG also gave evidence to the court as to his recollection of how he came to be satisfied that Springwell was an eligible client for the Margin Forward Programme, and had the relevant level of experience and sophistication.

199. As a result of changes in the regulatory regime, arising after the change in regulator in 1991 from The Securities Association to the SFA, Chase was required to classify its customers for the purposes of the new regime. The SFA had been created on 1 April 1991. Draft Conduct of Business rules were published on 15 April 1991, and issued in final form on 11 November 1991 to take effect on 1 April 1992. Chase was also concerned to carry out a classification exercise at this time, for the purposes of the Margin Forward Programme's requirement that those customers who wanted to qualify for that programme had to be deemed eligible by Chase's Private Bank credit department (in effect, GG) under the programme's criteria.
200. The SFA Rules included a high level set of "Statements of Principle" and detailed "Conduct of Business Rules". Under the latter, regulated firms owed certain regulatory obligations, including so far as is relevant for present purposes:

i) an obligation to take reasonable steps to ensure that it did not make any personal recommendation to a private customer of an investment unless the recommendation was suitable for him having regard to the facts disclosed by that customer and other relevant facts about the customer of which the firm was or was reasonably aware;^[68] and

ii) an obligation not to recommend a transaction to a private customer unless it had taken reasonable steps to enable him to understand the nature of the risks involved.^[69]

201. For the purpose of the SFA Rules:

"a 'private customer' means (a) a customer who is an individual and who is not acting in the course of carrying on an investment business; or (b) unless he is reasonably believed to be an ordinary business investor, a customer who is a small business investor and who is not acting in the course of an investment business;

an ordinary business investor includes a customer who is reasonably believed to be a body corporate with called up share capital or net assets of £5 million or more."

202. Further, a firm was entitled to classify a customer who would otherwise be a private customer as a "non-private customer" if it believed on reasonable grounds that the customer had sufficient experience and understanding to waive the protections afforded for private customers, the firm had given a clear written warning to the customer of the protections which he would lose and the customer had given his written consent after a proper opportunity to consider that warning.^[70] Written consent was not required where the customer was ordinarily resident outside the UK and the firm believed on reasonable grounds that he did not wish to consent in writing.^[71]
203. Springwell was a private investment company operating for the benefit of its three individual shareholders. On the realistic assumption that it always had net assets over £5 million, then it would never, strictly speaking, have qualified as a private customer, and so would never have been entitled to the benefit of the regulatory obligations imposed on firms in respect of private customers. Nevertheless, as was explained by Mr. Saunders, a high net worth individual operating through a private investment company would in practice be regarded as a private customer, for whom a non-private customer letter would be appropriate under the SFA Rules, in the event that the customer wished to trade in areas such as the emerging markets, so as to confirm that the regulatory obligations were not owed in relation to trading in that area.
204. The evidence also showed that, from about early 1992 to about August 1992, and thereafter, as the regulatory environment developed and the concept of "Know Your Customer" took hold, the Private Bank developed documentation whose aim was to satisfy the regulatory requirements when the Private Bank was going through the process of pre-qualifying new clients who wished to enter the Margin Forward Programme and also to record relevant information about existing customers who were utilising the margin Forward Programme. These documents comprised an Experienced Investor Questionnaire ("EIQ") and a letter setting out the terms of business applicable to the client's "Dealing in Developing Country Securities" ("the DDCS Letter"). The EIQ was a necessary document for compliance purposes, but GG was clear that he would not have based any credit decisions solely on that document. If a customer failed to sign a DDCS Letter, GG would not let that person trade LDC paper. In addition, the Private Bank Credit Guide identified four required characteristics of customers eligible to trade in LDC debt: (1) sophistication; (2) capacity to withstand loss; (3) prior experience; and (4) not looking to Chase for advice.
205. The process of Springwell's classification as a non- private customer was as follows. A memorandum entitled "Classification of LDC Debt Customers" from Chase Compliance department (GG and another) dated 31 January 1992, to VM and BS, recorded that customer files had been reviewed in order to classify Private Bank customers trading LDC debt as "business or non-private customers". Based on the information obtained from the Relationship Managers, customers in the schedule attached to the memo (including Springwell) were classified as business customers. The memo continued:

"In order to complete the classification exercise and commence sending Terms of Business now that a form has been approved by Legal, we recommend that a summary of the information known about the customer is prepared by the Relationship Manager. This should be similar in detail to the information in the November memorandum prepared to support Springwell's credit application. This summary will then be used to support the Business Customer classification."

206. Accordingly, the summary of information on Springwell for the purposes of the credit application was regarded by the Chase Compliance department as the example of appropriate detail on a customer sufficient to support the classification as a business customer for the purposes of the regulatory requirements.
207. I should also mention that, likewise, in relation to any spot trading that was being conducted, there were also eligibility requirements. These were documented and sent to JA for his confirmation that the terms of the programme were acceptable to the DCCM Group. To be eligible for the LDC Spot Trading Programme, the client was required to have a pre-approved trading limit, and there had to be a signed Terms and Conditions letter and the EIQ. Once again, among the requirements for spot purchase of LDC paper was that clients should be pre-approved as "Experienced Investors" and only DCCM approved assets were to be purchased.

The terms of Springwell's MFA and MFA confirms and the circumstances in which they were signed

208. The MFA between Springwell and CIBL was signed by AP, on Springwell's behalf, and by JA, on CIBL's behalf, and dated as of 24 April 1992. The MFA set out the relevant terms and conditions governing the provision for the forward sale by CIBL to Springwell of the specified investments as defined in the MFA. Each transaction, as defined, was also to be governed by the terms and conditions set forth in a confirm in a standard format, as set out in Exhibit A to the MFA; the terms and conditions set out in the MFA were likewise to constitute and form part of each confirm. The MFA also provided that each confirm and the MFA would constitute one single agreement between the parties.
209. Section 6 of the MFA contained the following relevant representations, warranties and acknowledgments by Springwell:

"Section 6. Representations and Warranties Acknowledgments

…

(b) Counterparty [Springwell] represents to CIBL, on and as of the Trade Date for each Transaction and on and as of the Forward Purchase Date for each Transaction (as if made on and as of each such date) that:

(i) Counterparty has made, independently and without reliance on CIBL or any subsidiary or affiliate of CIBL, its own decision to acquire the Specified Instruments for such Transaction and does not expect CIBL or any such entity to be responsible for advising it as to the investment merits of any Transaction, and in connection with such purchase has examined the terms and the investment merits of the Specified Instruments and such other information relating to such Specified Instruments and the obligor with respect thereto as it has deemed relevant and appropriate; [my emphasis]

(ii) Counterparty is a sophisticated investor familiar with debt obligations of the nature of the Specified Instruments and Counterparty understands and is fully able to bear all of the risks involved in the forward purchase of the Specified Instruments hereunder, including, without limitation, a risk of loss in excess of any Initial or Additional Payments hereunder pursuant to Section 4(a)(i) and 4(a)(ii);

(iii) Counterparty understands that CIBL or any subsidiary or affiliate of CIBL may have in its possession from time to time information relative to the Specified Instruments for such Transaction in addition to information provided to Counterparty by CIBL in connection with such Transaction. Counterparty further understands that CIBL or any subsidiary or affiliate of CIBL disclaims any obligation to disclose such additional information to Counterparty, and Counterparty waives any claims, now or hereafter arising, it may have against CIBL or any subsidiary or affiliate of CIBL arising out of the failure to disclose any such additional information; and

(iv) Counterparty has reviewed the tax and accounting consequences to it of purchasing the Specified Instruments for such Transaction, including without limitation, any withholding tax payable with respect to interest on such Specified Instruments. CIBL makes no representation as to and bears no responsibility for any withholding taxes payable with respect to or which may be deducted from payments by the obligor.

…

(vi) Counterparty is a business customer or non— private customer, as the case may be, under the Rules of the United Kingdom Securities and Futures Authority Limited ('SFA RULES').

…

(d) Counterparty hereby acknowledges and agrees to enter into each Transaction, notwithstanding that CIBL and/or its subsidiaries and affiliates (collectively 'Chase') may have a material interest in the Transaction or may have a potential conflict of interest with respect thereto, including, but not limited to, the fact that Chase may (i) act as underwriter or dealer in the instruments which are the subject of the Transaction; (ii) provide brokerage services to other customers; (iii) act as financial advisor to the issuer of the instruments which are the subject of the Transaction; (iv) act in the same Transaction as agent for more than one customer; (v) have a material interest in the issue of the Instruments which are the subject of the Transaction; or (vi) earn profits from any of the activities listed herein.

…

(f) Counterparty acknowledges that the "best execution" requirements of the SFA Rules will not apply in any of CIBL's dealings with Counterparty unless it is clear from the terms of Counterparty's order or other relevant circumstances that CIBL accepts such obligations in respect of any Transaction. except as set forth in the previous sentence, CIBL in under no obligation to accept from Counterparty and order placed on a 'best execution' basis and does not have or owe a duty to provide "best execution" as defined by SFA Rules (i.e. to ascertain the best available price in the relevant market for Transactions of the kind and size concerned or effect Transactions for Counterparty at a price which is no less advantageous to Counterparty in each transaction). Likewise, Counterparty has no obligation to disclose any remuneration which Counterparty or any third party with whom Counterparty or CIBL may effect the transaction might receive.

(g) Counterparty hereby authorizes CIBL to enter into Transactions which are not regulated by a recognized or designated investment exchange.

…

Section 8. Miscellaneous

…

(g) Entire Agreement. The Confirmation for each Transaction, as supplemented by this Master Forward Contract, constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter of such Transaction and supersedes all oral communication and prior writings with respect thereto."

210. The standard form of confirm for transactions purchased under the MFA contained the following clauses:

"5. CIBL hereby advises you that CIBL is a member of the [SFA] and is regulated by SFA with respect to the transaction specified above… CIBL further advises you, and the Counterparty hereby confirms, that with respect to the Transaction, any charges made reflect the fact that it was effected upon an execution-only basis, without CIBL having given or being requested or expected to give advice about the investment merits of the Transaction...

Please confirm (i) the foregoing correctly sets forth the terms of our agreement and of the particular Transaction to which this Confirmation relates, and (ii) the representations and warranties made by you in Section 6 of the Agreement are true and correct with respect to this Transaction on and as of the Trade Date and Forward Purchase Date, by executing the copy of this Confirmation …."

211. Not surprisingly, given the passage of time, both AP and JA were vague about the circumstances in which the MFA was signed. I find as a fact (to the extent to which it was not common ground) that JA explained the commercial and practical aspects of the MFA to AP, but did not explain, or point out, the effect or detail of the relevant legal provisions of the MFA as set out above. I find that it is likely that AP would have cast his eye over the agreement, but would not have read it in any detail. I reject as incredible AP's evidence that, had he had explained to him, or appreciated, the provisions relating to Springwell's status as a sophisticated investor, or the acknowledgment that it did not expect Chase to be responsible for advising it as to the investment merits of any Transaction, he would not have signed the MFA on Springwell's behalf, as being inconsistent with its pre-existing relationship as "had already been made with [EM]". Apart from the fact that I have concluded that no such arrangement was made with EM, I find that AP was simply not concerned with the content of contractual documentation during the entirety of his relationship with Chase. I do not accept that, had either JA, or FS, or indeed other Chase employees, tried to explain to him the detailed meaning or effect of particular clauses in the MFA (or indeed the other contractual documentation), he would have listened to them. His attitude was that, provided he understood the critical commercial terms so far as he was concerned, namely, what it was going to cost him to borrow, how much he could borrow, and what assets could be leveraged, he simply was not interested in the detail of the individual clauses.
212. Nor do I accept that, had JA (or anyone else) explained the detailed provisions of the MFA to him he would have acted any differently. Thus he suggested in evidence that, had he read the MFA, he would have gone through the document, given Chase his comments and negotiated the terms of the clauses. That strikes me as wholly unreal speculation. AP's main complaint was that he relied upon JA's recommendations in making his (AP's) decision as to what investment to make, and that it would have been impossible for him to have run the portfolio without JA's advice; he said that he certainly would have objected if he had been told that the terms of the MFA meant that JA could no longer give advice to Springwell. But the relevant clauses of the MFA (and, indeed, the other contractual documents) did not in any way prevent JA from giving AP recommendations or advice; all they said, consistently, was that Springwell could not hold Chase responsible for advising it as to the investment merits of any transaction and that Chase was not Springwell's investment advisor. But there was nothing to suggest that AP was ever concerned about the question of the legal liability of Chase as an advisor. AP himself said that it never entered his mind that there might ever come into existence circumstances in which he might want to sue Chase in respect of JA's advice. He suggested in evidence that he would never have agreed to have given up such a right. My conclusion is that, had it been explained to him that the effect of the clause was that he would be unable in the future to sue Chase in respect of JA's advice, that would have made absolutely no difference whatsoever to his wish to sign up to the MFA programme and to be able to leverage Springwell's emerging markets purchases more effectively.
213. Nor can I accept his evidence that, had he read the document, or had it explained to him, he would have objected to those terms which confirmed Springwell's sophistication. In my view the Polemises would have had no difficulty in confirming their and Springwell's sophistication as investors, if that was the gateway to enable Springwell to access the new Margin Forward programme. (This attitude was confirmed by their willingness to carry on doing so in documents signed with other financial institutions after the Russian default.)
214. When cross-examined about the inherent improbability of Springwell ceasing to trade with Chase, because of a refusal to sign up to the MFA, AP suggested that, in such circumstances, he would indeed have refused to sign, and would have asked to have had Springwell's account transferred to the Chase Private Bank in Geneva, where Springwell would have become a client of the Private Bank. He suggested that, in that event, Springwell would have received investment advice from a private banker in Geneva but that he (AP)

".. would have no contact with anybody in the trading rooms or whatever it is and I would have gone with a private banker who would be allowed to give me advice and that is how it would have been. But I think they wanted to keep this thing here." ^[72]

215. I reject this evidence as approaching fantasy. Apart from the fact that neither Springwell nor AP had any relationship with Geneva, it was clear from his evidence (and, indeed, that of JA), that what AP (and other Hellenic clients) really valued was his ability to access the trading floor at IFI directly, and to deal person to person with JA, thereby affording Springwell access to real time information and keener pricing. The transcripts show AP's recurring impatience to buy paper and to make immediate investment decisions. The notion that AP would have rather dealt through a Geneva Private Banker, who would have given him investment advice, but not permitted AP to have had any direct access to the trading floor (which process necessarily would have been much slower and would not have resulted in AP having current pricing information), than sign up to the MFA and its exclusion clauses, I regard as unreal.
216. The documentary evidence and evidence of the Chase witnesses clearly showed that it was an essential pre-condition of Chase being prepared to afford Springwell access to the Margin Forward Programme that Springwell signed the relevant contractual documents. I conclude that Chase would not have permitted Springwell access to the leverage afforded by the Margin Forward Programme, had AP refused to sign the MFA; nor would Chase have been prepared to have negotiated the removal or amendment of the provisions whereby Springwell acknowledged that it was not relying on advice from Chase and that it was a sophisticated investor. Moreover, it is inconceivable, in my judgment, that AP would have chosen to terminate his existing and successful trading relationship with Chase, in circumstances where Chase was insisting on Springwell signing the MFA without any amendment to the relevant provisions, simply because of the issue that Chase was refusing to accept legal liability in respect of advice, which was an issue that had never entered his mind in the past.
217. Between April 1992 and September 1997, when the MFA was replaced by another market standard document, the GMRA, Chase provided leverage to Springwell in many transactions in respect of the latter's purchase of emerging markets assets under the terms of the MFA. For that purpose CIBL provided confirms in accordance with the standard form annexed to the MFA. In the same way as Springwell had previously signed the confirms under the original Investment Grade Facility, it duly signed the confirms under the MFA.
218. There was no dispute on the evidence as to the manner in which the confirms and other transaction documentation was provided. As explained by AP, multiple copies were in fact provided to Springwell. Either on the day he had agreed the transaction or the next day, he would receive the documentation by fax from Chase in London. He would go through it and check that it contained the information that JA had given him about the transaction. Two or three days later, further copies of the transaction documentation would be sent by Chase New York to Springwell in London. At least from 1996, copies would also be sent to Piraeus.
219. Further, there was no dispute on the evidence as to the circumstances in which Springwell came to sign the documentation. The confirms were not promptly signed and returned on receipt. Instead, AP would allow a backlog to build up, and Chase would eventually arrange to bring round a batch of further copies, which would be signed in one sitting and handed back to Chase. They would be signed in London, rather than Greece, usually by George Vakirtsis (the Polemis Group Head of Accounts in London), purportedly in the name of JBAX, a nominee director of Springwell, who resided in Greece. There was no dispute, however, on the evidence that these gentlemen played no part in Springwell's decision making or business, which was conducted entirely by the Polemises, and in particular, AP.
220. Because the signed copies returned to Chase were not kept, the only disclosed versions of the confirms were the unsigned copies retained by Springwell. However, as I have said, it was not in dispute that Springwell did in fact sign copies of the MFA confirms. The documents contain frequent manuscript notations and marks, which show that SP and AP carefully checked and reviewed at least the financial terms of the transactions.

The DDCS Letters

221. By a DDCS Letter, dated 23 November 1992 ("the 1992 DDCS Letter"), written on CMB paper and signed by SPAP on behalf of CMB and CIBL, CMB and CIBL notified Springwell of its classification by them as a non-private customer for the purpose of the rules of the SFA, and of the effect of that classification. The letter also set out terms of business applicable in respect of Springwell's "Dealings in Developing Country Securities". According to the date stamp on the copy disclosed by Springwell, the 1992 DDCS letter was received by it on 1 December 1992. It does not appear to have been signed and returned to Chase.
222. The required EIQ for Springwell was not completed immediately. However it appears from an internal Chase memorandum dated 10 December 1992 that, although all customers of CMB who traded in LDC debt through IFI (i.e. JA's department) had been sent the DDCS letters by that date, none had as yet responded in writing. Nevertheless, the memo continued :

"The questionnaires (prepared by New York) to confirm the customer's experience have not yet been completed for all customers, however, sufficient information is known by the RMs to classify each customer as an expert and that will be documented and filed on the customer's file ...".

223. An EIQ was subsequently signed by the Private Bank in relation to Springwell. It stated that Springwell was classified as "a sophisticated investor" who had "traded extensively in LDC debt for well over 3 years" and who was "fully aware of the speculative nature of this investment", including certain defined risks. It also stated that Springwell was "purchasing all emerging markets paper on an execution only basis and was not looking to Chase for advice". According to EM, the body of the questionnaire would have been prepared by FS, or another Private Bank officer, "with the customer" before being signed by him.
224. There were two versions of Springwell's 1993 EIQ in evidence. The first version is signed by EM, although there is no date next to his signature, and also either by another Chase officer, who has dated his signature 8 May 1993, or again by EM himself, who was unclear whether the second signature was his or not; the actual position matters not. The second version is identical in every respect, save that EM has this time dated his signature 11 June 1993, and the second signature does not appear. In his oral evidence, AP sought to suggest that the version of the EIQ bearing the date 8 May 1993 was backdated so that it preceded a subsequent DDCS letter dated 28 May 1993. However the point was not put to EM, the author of the document, or to any other Chase witness. In any event the allegation is an irrelevant one, since, even if the document had been backdated, EM did not suggest that he had changed his views about what was said in the EIQ between 8 May 1993 and 28 May 1993. Thus, in his oral evidence, he confirmed that that he would not have signed the EIQ without going through the document to check the answers which had been filled in by his subordinate; he confirmed that the statement that Springwell was "a sophisticated investor involved in a broad product range" who had "traded extensively in LDC debt for well over 3 years" was "absolutely accurate"; he further confirmed that, as set out in the form, AP was fully aware of the speculative nature of the investments and must "absolutely" have known of the identified risks attached to it. However, in relation to the statement in the EIQ that Springwell was purchasing all emerging markets paper on an execution only basis, and was not looking to Chase for advice, he regarded that statement as being "a little bit stretched", although not so stretched that he felt unable to sign the document as Springwell's Relationship Manager.
225. A further DDCS letter ("the 1993 DDCS Letter"), in the same terms as the 1992 Letter, was delivered by hand by FS, who took it round to the Polembros offices in London on 28 May 1993, where (as was common ground) it was signed by AP, on behalf of Springwell, by way of purported acceptance and returned to FS in the course of his visit. The letter was also signed on behalf of CMB by FS and on behalf of CIBL by JA. AP signed his name directly below the statement:

"I have read and understood the above notice and consent to be treated as a Non-Private Customer."

226. The 1993 DDCS Letter (and the earlier 1992 DDCS Letter and the later 1997 DDCS Letter) included the following, or similar, terms:

"Dealing in Developing Country Securities

We refer to our recent discussions when you informed us that you wised us to effect an introduction to the capital markets desk of our associated company, Chase Investment Bank Limited ('CIBL'), with a view to you dealing for your own account in various debt and equity securities of public and private sector issuers located in developing countries ('instruments').

We are pleased to arrange such an introduction on the basis that the following conditions apply, both to our activity in arranging the introduction and the activity of CIBL when dealing for you in such instruments. This letter is accordingly signed on behalf of both ourselves ('CMB') and CIBL. The conditions referred to above are:

1. CMB and CIBL have decided, having regard to the frequency and size of your dealings in instruments, and having regard to your understanding and experience in such investments (as far as is known to CMB and CIBL) to categorise you are a Non-Private Customer for the purposes of the rules of The Securities and Futures Authority Limited ('SFA'), in respect of dealing in such instruments."

2. By treating you as a Non-Private Customer, you will not gain the same degree of protection under the rules of SFA than if you were to be treated as a Private Customer. Neither CMB nor CIBL will be required to comply with the rules which are designed to protect Private Customers and as a result will not be required by the rules to give you risk disclosure statements [or] to ensure that any advice which is given to you is suitable to your circumstances ….

3. Please note that your rights to sue either CMB or CIBL for damages under section 62 of the Financial Services Act 1986 will be restricted as, in the main, you will only be able to sue for breaches of the obligations owed to you as a Non-Private Customer which will not include the Private Customer protections outlined above. You will also lose the right of access to the Customer Arbitration Scheme of FSA.

4. Neither CMB nor CIBL is required to give you investment advice generally or in relation to specific investments, make any enquiries about, or to consider, your particular financial circumstances or investment objectives. By placing an order with CMB or CIBL you represent that you are a sophisticated investor … and that you have independently, without reliance on CMB, CIBL or any associated person, made a decision to acquire the instrument having examined such information relating to the instrument and the issuer thereof as you deem relevant and appropriate. You have represented to CMB and CIBL, and therefore they have assumed that, you are fully familiar with and able to evaluate the merits and risks associated with such instruments and any consequence of these instruments forming part of a portfolio of investments and are able to assume the risk of loss associated with such instruments. You should therefore consider whether an instrument is appropriate in your particular financial circumstances or in the light of your investment objectives. Neither CMB nor CIBL is liable for any loss which you may incur arising out of any investment decision made by you in consequence of any service contemplated in this letter unless such loss is caused by its gross negligence or wilful misconduct ….

5. Your attention is drawn to the fact that when CMB or CIBL deals with or for you it or any other company in the Chase Manhattan group may have an interest, relationship or arrangement that is material in relation to the transaction or instrument concerned ….

The Chase Manhattan group requires it employees to comply with an independence policy requiring them to disregard the interest, relationship or agreement concerned.

The following are examples of the type of interest, relationship or arrangement that could be involved:

(a) being the financial advisor or leading banker to the company whose securities, including debentures, you are buying or selling, or acting for that company or another person in a take-over bid by or for company;

(b) sponsoring or underwriting the new issue or other transaction involving the instrument that you are buying or selling;

(c) having a holding or a dealing position (as a market-maker or otherwise) in the investment concerned, including options or warrants or futures on the instrument concerned;

(d) receiving payments or other benefit for giving business to the firm with which your order is placed;

(e) being an associated company of the issuer of the instrument; or

(f) conducting research or publishing research recommendations with respect to an issuer involving the instrument you are buying or selling.

6. When providing you with any circular, information memorandum, investment advertisement, published recommendation or any other written or oral information regarding any instrument or investment opportunity, neither CMB nor CIBL will have taken any independent steps to verify the document or information and no representation or warranty, express or implied, is or will be made by either CMB or CIBL, their representative officers, servants or agents or those of their associated companies in or in relation to such documents or information nor will CMB or CIBL or any of their associated companies be responsible or liable (save to the extent required under any applicable law, rules or regulations) for the fairness accuracy or completeness of such documents or information."

7. (a) You hereby:

(i) mortgage, pledge and charge to CIBL by way of first fixed security interest all your present and future rights, title and interest in and to your investments now or hereafter deposited or transferred with or to, or to the order of, CMB, CIBL or any other company in the Chase Manhattan Group;

(ii) assign to CIBL all rights relating to and arising from the secured investments including interest, dividends, voting rights and the right to delivery of investments held in a clearing system, clearing house, exchange or with a broker;

(iii) charge all cash from time to time deposited with, or to the order of, CIBL or CMB or any other company in the Chase Manhattan Group and the debts represented thereby, and interest accruing thereon,

in each case by way of continuing security for the payment and satisfaction of all liability, loss, charge, cost or expense (actual or contingent, present or future) which CIBL incurs in connection with transactions effected on your behalf (and of all other obligations and liabilities (actual or contingent, present or future) of you to CIBL).

(b) Sections 93 and 103 of the United Kingdom Law of Property Act 1925 will not apply to these security interests, and accordingly CMB or CIBL (as appropriate) may consolidate any two or more of your security interests and may exercise its power of sale without the restrictions that would otherwise be imposed by Section 103.

(c) You will execute all documents and do all things necessary to perfect title to, and confer the full benefits of the security interest hereby granted; and you appoint CIBL as your true and lawful attorney to execute all documents and to do all things necessary for this purpose.

(d) We may reimburse ourselves out of, and set off cash hereby charged for and against all liabilities mentioned in (a) above.

(e) You authorise CIBL to debit your account(s) at CMB in respect of sums due in respect of purchases of investments made on these terms on the relevant settlement date and effect payment to the Chase Manhattan Bank, NA London branch Account 011-0-9622009 for further credit to Chase Investment Bank Limited Ref: TR.99999.

I have read and understood the above notice and consent to be treated as a Non-Private Customer."

227. There was a dispute on the evidence as to what, if anything, was said by FS to AP by way of explanation as to the requirement that Springwell should sign the letter. Not surprisingly, neither FS nor AP recalled the specific circumstances in which the letter was signed, as it was signed over 14 years ago. FS' evidence in his witness statement evidence, which he stood by in cross-examination, was that he would have explained to AP before he went round to the Polembros offices that the DDCS letter was a standard form bank letter which Chase required customers to sign in order to show their consent to being classified as a "non-private", i.e. sophisticated, customer of the bank.
228. AP's evidence in his witness statement was as follows:

"I would not have read the letter and I do not recall anything special about it. Finbarr would simply have presented it to me and asked that I should sign it and I would have done so without questioning him. Finbarr would then have taken the signed document back."

229. In cross-examination, he said that he did not recall any discussion about the letter with FS and that FS would not have told him what the letter was about. In particular, he complained that he would never have agreed to paragraph 7 of the 1993 DDCS Letter, which created a charge over all Springwell's assets deposited with or transferred to Chase. He also said that he would not have agreed to the contents of the rest of the 1993 DDCS Letter had they been pointed out to him. The following passages from the transcript convey the flavour of his evidence about this meeting:

"A. He would not have told me what this letter was about because it contains things in there that it would be impossible for him to explain to me, including mortgaging the whole of Springwell, regardless if we had leverage or not or the cash and everything. I recall not specifically this date that we signed this document, but in general when I was meeting Finbarr we would have -- sort of meet for 10 or 20 minutes in the office and we would have coffee and talk. One of the favourite topics was football. But we did not have discussions on -- in-depth discussions about neither the confirmations and what they entailed or this kind of documents. Also this document is dated 28th May and the signature of Finbarr is 28th May, so I am pretty sure that he brought it. It is dated the same day. It was not sent by mail as we said before. So I would not have read it, like I said in my statement, and he would have been aware because we had been together.

…

Q. If Finbarr had arrived at your office without there having been any prior discussions about the nature and subject matter of this letter, and if he had simply said to you, "Right, here is a letter, sign it", you would have said, "Well, what is it about?"

A. About the margin forward arrangement that we have.

Q. Well, it is not. It is about classifying Springwell as a non-private customer.

A. Among other things now that I have read it, yes.

Q. The point that I am putting to you is that it must be highly improbable that you would have signed this letter without at the very least asking what its subject matter was.

A. Well, it would have been about what we were doing with Justin, about buying the emerging markets paper, about the Springwell account, not something different. I mean nothing came out whatsoever with regards to the non-advice -- you know, the things that it contains in here. I am certain that we did not discuss any of that because I would have remembered." ^[73]

……..

"Q. If you look at the first page, it is surely striking that you have got two numbered sub-paragraphs. You can see immediately, looking at the words that introduce them, that they are conditions. Surely you would have got as far at least as numbered paragraph 1.

A. If you would have brought this letter to me, I would definitely have read it. But it was Finbarr bringing -- you know, who has been opening our accounts. I would like to also tell the court another piece of information that is relevant with Finbarr. Finbarr, because he was in the shipping department before and because of the relationship we had with Chase -- we did all the closes with Chase and Chase would always pay for all the ships -- it was actually Finbarr, instead of somebody from our office, who was in all the closings. He was the one who would make all the payments. He had power of authority from us. He would make all the payments. So he was an individual that although working for the bank in the closings of vessels, he had the power of attorney from the owners to pay, receive, to do everything.

He was a very trusted -- there are certain passages that Finbarr mentions, in talking in telephone conversations and so on, where he expresses this mutual trust that we have. He says that we will sign any document that is given from -- so what I am trying to say is that there is no reason in the relationship which is going on for many years -- let us forget about the emerging markets, let's go to the previous years, with shipping and so on -- there is no reason that every time we have to think that, "Ah, there is something else going on and -- behind this document" or whatever, especially when the other side is not telling us that, "Look, you know, there are some important aspects of this document, which briefly they are (a), (b), (c), and I would like you, Adam, to read them, you know, and I will come tomorrow to pick it up" or something like that. It is a document dated 28th May, signed by Finbarr on 28th May, which is brought physically to the office. We have coffee, talk about Grimsby Town Football Club, which was his club, and you know, off we go. So it is extremely relevant, I agree, to this case and it is extremely -- you know, I am explaining it in a very naive fashion, but I can only say what it really was happening." ^[74]

"it is like signing a loan for a ship and then finding out, when you read the loan documentation, that you have assigned your whole fleet…is it possible to produce a document that you bring by hand and you talk about football and it has a clause there that you are mortgaging everything and you are not telling the customer?" ^[75]

"Q. Let me put it this way: if these matters were and are of such importance to you, and by "these matters" I mean things such as the provisions of paragraph 7, if they are of such importance, then you would not have signed this document without reading it.

A. Well, I would not have signed this document period if Finbarr would say to me, "Adam, you know, I think you should read this document. I know you don't usually read it, but you should read it or let me just tell you a few bullet points of this document, that you are classified this and there is no advice, no sophistication and so on". In a way there are certain things in here that they know -- the person that brought it to me knew that if I would have read, I would not have signed it. So it was to their interest. There is a conflict of interest here."^[76]

229. FS' evidence was that he would never have gone to a client's office without first having called them to make an appointment and explain why he was going. As FS put it, "I don't just knock on clients' doors". It was suggested to FS that he would have said to AP, "this is just a bit of paperwork that I need for compliance", but he rejected this and said "I was never as flippant as that to our clients".^[77] He believed that he would have given AP an explanation or overview as to the 1993 DDCS Letter and that he would have explained that the DDCS Letter was a standard form bank letter which Chase required customers to sign to show their consent to being classified as a 'non-private', i.e. sophisticated, customer of the Bank. He accepted, when pressed in cross-examination, that he did not explain paragraphs 4 or 7 of the Letter to AP and appeared to accept that AP would not have read the letter, although in reality it was clear that he had no actual memory of the meeting at all. In re-examination he stated that he would have read the 1993 DDCS Letter before he went round but that he did not believe at the time that there was anything prejudicial to Springwell in the 1993 DDCS Letter.
230. In some respects FS was not an impressive witness; he came across as nervous, diffident and stressed (indeed he had apparently retired from Chase because of the stress of dealing with SP and Springwell-related issues in the aftermath of the Russian default). He was clearly not in good health and was nothing like as articulate or impressive as many of his superiors. He appeared unwilling to accept that on any level Chase might have been giving advice to Springwell, which I found unrealistic. His principal functions, even after he subsequently became Springwell's Relationship Manager, were administrative and clearly he was a reliable administrator, who was valued and trusted by AP, in that capacity. Indeed, AP had considerable respect (and subsequently sympathy) for FS. But AP would have been well aware that FS' functions were mainly administrative and that he was not a high flier. I found FS to be an honest witness who did his best to assist the court, even though in many respects his recollection was poor.
231. My findings in relation to the signing of the 1993 DDCS letter are as follows:

i) FS took his responsibilities to his clients seriously, and would not have gone round to the offices of an important client such as Springwell, and such a demanding and busy man as AP, without having first explained, at least in general terms, what the purpose of the meeting was and what the function of the document was that had to be signed.

ii) It must have been clear to AP that the 1993 DDCS letter was an important document that was intended to have legal consequences. The letter was a short document, and, however superficially he may have glanced at the rest of the letter, I cannot accept that he did not read the single sentence above his signature.

iii) Likewise, whilst I accept that AP may well have looked, or even glanced, at the rest of the letter only in a superficial way, he was a tough and shrewd businessman, who, I find, would not have signed what was obviously an important document without some general awareness or appreciation of its subject matter. I do not accept that he had no appreciation of what the letter was about.

iv) I conclude that, if he had really thought that Springwell had the benefit of a full advisory relationship with Chase, he would have questioned what was the effect of the letter on that relationship or the impact of his consent to be treated as a Non-Private Customer.

v) I reject his evidence that he would not have signed the 1993 DDCS Letter, if he had appreciated that it contained a charge over Springwell's assets deposited with, or transferred to Chase, in favour of CIBL in respect of all Springwell's liabilities to CIBL. Springwell clearly had potential liabilities to CIBL under the MFA and I do not consider that it would have troubled AP in the slightest that its assets (mainly those which had been purchased under the programme), and were in any event held by Chase, stood as security in respect of such liabilities.

vi) Likewise, for similar reasons as those set out in relation to the MFA, I reject his evidence that he would not have signed the 1993 DDCS Letter, if he had appreciated that it contained the Relevant Provisions relating to advice, non–reliance, treatment as a Non-Private Customer and sophistication.

vii) I reject Springwell's assertion^[78], maintained by AP in cross-examination, that FS had actual knowledge at the time when FS presented AP with the 1993 DDCS letter for signature, that AP would not have signed it had FS explained it to him. Despite some unfortunate passages in transcripts of later telephone conversations with JA, I do not consider that FS was in fact the type of person who would have presented a document for signature to a client, knowing that the client would not sign it if he read it. I do not consider that FS was sharp or dishonest, which is what this allegation implies. In particular, I do not consider that FS would have been foolish enough to have attempted to pull the wool over the eyes of a client as astute as AP. Whatever AP's general propensity not to read documents, there was every risk that he might read something as short as the 1993 DDCS Letter.

232. A third DDCS letter, dated 17 September 1997, in similar terms, was delivered to Springwell in view of the transfer of CIBL's transactional business from CIBL to CMIL. Again, it was on CMB writing paper, but signed on behalf of CMB, CMIL and CIBL (by then under its new name of Chase Manhattan Bank Plc). This letter was also signed and returned by way of purported acceptance by Springwell. There is likewise a dispute as to circumstances in which it was signed which I deal with below, when addressing events in 1997.
233. I accept that, on the evidence, the DDCS letters were of particular significance, because they reflected a regulatory classification consciously undertaken by Chase in the absence of which Springwell would not have been permitted access to the Margin Forward Programme or, subsequently, the repurchase programme. Classification as a non-private customer was a necessary pre-condition, laid down in New York, for participation in the programmes. Another necessary requirement was the signing of the relevant confirmations and legal agreements.
234. I conclude, that by sending the letters, CMB, CIBL and CIML made it clear to Springwell that, in respect of transactions otherwise subject to the rules of the SFA, Springwell was not entitled to the regulatory protections available to a private customer. They also confirmed that they were not undertaking any obligation to Springwell to advise as to suitability or to take steps to enable Springwell to understand the nature of the risks involved in any transaction which Springwell chose to conclude. On the face of the documents, by signing the latter two letters, Springwell purportedly agreed to these terms. Furthermore, in such manner Springwell also purportedly agreed and represented that it placed no reliance at all on Chase and further that it was itself able to evaluate the merits and risks associated with the instruments it purchased. I accept that it was only on this basis that Chase was willing to conduct business with Springwell in the way which it did. The issue which I have to decide, in the light of the defined Key Issues, however, is whether, in all the circumstances, Chase is entitled to rely on the assurances purportedly given by Springwell. I address this issue as part of my conclusions in relation to the legal analysis.

The early expansion of Springwell's portfolio of emerging markets investments

235. Springwell began to invest in emerging markets products in the very early 1990s, and its portfolio held at Chase grew exponentially as the 1990s progressed. From 1990 to mid-1991 these were mainly concentrated in Mexican and Brazilian investments. From mid-1991 to 1994 Springwell made further investments in Brazil, Argentina and Venezuela. Until 1994, Springwell also maintained an account at Banco do Brasil through which it also purchased emerging markets investments up to an amount of approximately $ 35 million.
236. By 1991, Springwell already had a significant portfolio of emerging markets instruments, primarily in Mexico and Brazil, in what were the very early days of the market. Thus, as an example of the extent of Springwell's emerging market portfolio, as at 21 February 1991 Springwell's safe custody account comprised $ 54.5 million LDC paper at CMB New York and $ 65.2 million LDC paper at CIBL, London, a total of $ 119.7 million. The investments purchased included mainly Latin American instruments. Latin America was the centre of the emerging markets business in the early 1990s, and, as AP described in his oral evidence, the Polemis brothers, and in particular SP, had extensive experience in Brazil through the shipping business, so they felt comfortable in that market. In his evidence, AP stated that the idea of emerging markets investments was attractive to him because of the rate of return on the investments which was better than had previously been available. The fact that, in 1991, when Springwell had $ 100 million invested in emerging markets, the Mexican Brady bonds had just been issued and Brazil was still in default on foreign currency bank debt, shows how early in the development of emerging markets trading Springwell was involved.^[79]
237. This attitude to risk, so as to generate a higher rate of return, was reflected in the minutes of the Shipping Department's risk rating review of 21 March 1991, which recorded the downgrading of Springwell's rating from a 5 to a 3 to reflect:

"the high average age of the fleet combined with the Principals' "propensity to invest in relatively risky paper (i.e. Latin American CD's)."

Other Chase internal documents in 1991 similarly recorded AP and SP as having a "propensity to take a high level of risk with a substantial portion of their liquidity".

238. Springwell's portfolio increased rapidly over the early to mid 1990s, particularly once leverage became a feature of the Springwell portfolio. By the mid-1990s, I find that the Polemises had indeed become highly experienced investors in the emerging markets. As I have described, they had been involved at the inception of the market and developed their portfolio as the market developed. Following the Petrobras issue in 1991, Springwell continued to buy Brazilian instruments, including Brazilian government 'C' bonds, which were restructured defaulted loans. It also purchased a number of other Petrobras bonds
239. From mid-1991 to 1994 Springwell made further emerging markets investments in Brazil, Argentina and Venezuela in keeping with the growth in volumes traded in the market generally; thus, from mid-1991 to the end of 1994, the Springwell portfolio trebled in an improving market. In Springwell's portfolio, Mexican assets declined both in absolute and percentage terms during this period. It appears that the Mexican assets in Springwell's portfolio were replaced by Brazilian, Argentinean and Venezuelan instruments as these countries completed their Brady restructurings. These countries would have presented better yield opportunities than Mexico at that time. Further, the increase in the leverage sought by Springwell over the same period contributed to the expansion in the profits and the reinvested profits in turn caused the portfolio to expand further.
240. Further, various emerging markets investments were also made by Springwell through their account with Banco do Brasil, London branch. This account had been opened in the late 1980s. The Polemis brothers had a connection through the wife of the branch manager. They had initially placed $ 2.5 million on time deposit, which, over time, they increased to $ 35 million. In addition, further emerging markets investments were made through Banco do Brasil: $ 5 million of a Banco do Brasil bond issue was bought in May 1992 and two Petrobras bonds (in sums of $5 million and $15 million) were bought in 1993. SP, rather than AP, was responsible for these investments and his evidence was that he believed they were both solid companies. The Banco do Brasil relationship ended in 1994 when the account was closed and the bonds still held at that bank were transferred to Chase. This demonstrates the Polemis brothers' ability to invest in emerging markets investments through banks other than Chase, as well as their experience in this market.

Growth of Springwell's portfolio and increases in leverage

241. Springwell's first purchase of emerging markets bonds with leverage in 1991 was the Petrobras paper. By March 1994, less than three years later, Springwell had increased its forward margin line up to $ 350 million. This was almost 45% of the total existing allocation to the Hellenic group clients of $ 785 million at that time. By December 1995, the credit line had increased to $ 440 million, and by June 1997 to $ 500 million. In 1998, there was an application afoot to increase the line to $ 600 million. Requests for forward credit line increases were made on the following dates:

i) $ 40 million to $ 90 million in September 1992;

ii) $ 90 million to $ 100 million in November 1992;

iii) $ 100 million to $ 110 million in January 1993;

iv) $ 110 million to $ 140 million in March 1993;

v) $ 140 million to $ 300 million in May 1993;

vi) $ 300 million to $ 350 million in February 1994;

vii) $ 350 million to $ 400 million in June 1995; and

viii) $ 400 million to $ 425 million in October 1995

ix) $ 425 million to $ 440 million in December 1995

x) $ 440 million to $ 500 million in June 1997.

242. In cross-examination AP sought to suggest that the increases in leverage from $ 15 million to $ 500 million were not at Springwell's instigation, but that the increases were happening "automatically", as a result of the Private Bank and JA seeking to expand their business and the amount of product sold, although he, AP, was quite happy with the situation.
243. I reject this suggestion. The contemporaneous documents and other evidence show that it was AP, during the whole period, who was the driving force behind the requests for increases in the leverage facilities so that he could, potentially, generate greater returns for Springwell. I have no doubt that he was well aware that the use of leverage increased the risks on the portfolio, because of the possibility of margin calls, and that, ultimately, the finance would have to be repaid to Chase. I find that, notwithstanding his careful strategy of maintaining a low level of borrowings in relation to the Polemis shipping fleet, when it came to Springwell's portfolio, he was extremely keen to maximise the use of leverage so as to maximise returns. Indeed, at one stage the Private Bank was complaining that AP would not do a trade unless he could leverage it to the hilt. On another occasion AP complained that one of the reasons he did not want to purchase further emerging market investments from Merrill Lynch was that it would not allow him to leverage as he wanted to do. The later transcripts of his telephone conversations with JA also show that his focus was on the enhanced returns that leverage made potentially available. He considered his "liquidity" (i.e. the amount of funds that Springwell had potentially available to invest) as being the leveraged amount, and he regarded investments not financed as representing money lost.
244. Jorge Jasson ("JJ"), one of the Chase witnesses, who supervised JA, had joined Chase in early 1986, and, having worked in Argentina and Brazil, transferred to New York in January 1991, to set up and head the new issues desk of the emerging markets business. In around 1993, on KO's promotion to co-Head of Global Markets, he took over as Head of Emerging Markets and then as Head of IFI. He retained a very senior position in these departments, including being a Member of Chase's Senior Committee until he left Chase in 2003. JJ was clearly a highly intelligent and experienced banker. Although JA did not have a direct reporting line to JJ, but rather JA reported to his immediate superiors, who reported in turn to JJ, JJ did have a lot of contact with JA, as a senior salesman, and received frequent reports from him. JJ summarised his assessment of Springwell's approach to emerging markets investments as follows:

"A ... My own observations and my own experience is that Springwell was sophisticated, aggressive, greedy, and that they were in many ways at the forefront of investing in emerging markets …."

That, in my judgment, was an accurate description of Springwell's profile as an investor.

245. The expansion in leveraged emerging market purchases by Springwell was not peculiar to Springwell, as there was a rapid and dramatic expansion of emerging markets business generally within the Hellenic group customer base and beyond. However, it is clear from the speed with which the expanded credit lines were utilised by Springwell that AP had a real enthusiasm for expanding the profitable enterprise in which Springwell was engaged. The notion that he was a passive participant in the grant of ever-increasing facilities, or that JA was the driving force behind such increases, is simply not consistent with the commercial reality, as I find it to have been.
246. The evidence shows that the frequent requests by the Private Bank to the Credit Department to increase the facility were clearly as a result of pressure exerted by AP. I conclude that the expansion of the leverage in the Springwell portfolio was a deliberate decision on AP's part, in line with Springwell's investment objectives. I also find that AP was motivated by the profitability of the leveraged emerging markets investments. These profits were re-invested by way of coupons and capital gains and the Springwell portfolio thus expanded exponentially during this period. Contrary to Springwell's allegations, the evidence showed that the expansion in the Springwell portfolio cannot be attributed to shipping profits alone, or even in the main. I find AP to have been astute and shrewd in his dealings where leverage was concerned, as with everything to do with his portfolio. He was a skilled negotiator, who, perfectly legitimately, used his position as a large, profitable and valued customer within the Private Bank to obtain the best financing terms available, such as lower downpayments and higher advance rates.
247. Thus, for example, in connection with the increase in Springwell's forward credit line from $ 40 million to $ 90 million in September 1992, SPAP, in a memorandum to KOD dated 24 September 1992 which sought an increase in the forward line for all Hellenic customers, wrote that the Private Bank was:

"… under extreme pressure from existing users of the programme as well as existing customers who would like to get on the programme, to offer increased and/or new facilities."

248. In fact, the proposed increase in facilities of $ 50 million in the forward line for Hellenic customers was entirely for Springwell's benefit – to increase Springwell's line from $ 40 million to $ 90 million. I conclude that any pressure and urgency to accommodate the request is likely to have come from Springwell in order that it could continue trading emerging markets paper on margin. Thus, in his memorandum, dated 25 September 1992, in support of Springwell's application, SPAP stated that Springwell was the group's most important customer and that Springwell was heavily marketed by the competition. The memorandum continued:

"This request for an increase in their forward purchase credit line is the third in the last four months. They feel they have more than deserved it, as they were the first to be involved in DCCM paper more than four years ago and are very aware of the risks and rewards it entails."

249. Similarly, in a further Private Bank memorandum dated 25 May 1993, applying for an increase to $ 300 million in Springwell's emerging markets line, EM stated that Springwell had been marketed aggressively by the competition, and that:

"Springwell feel that they can afford to increase their leverage in their portfolio and have requested Chase to consider an increase in their line from $ 140MM to $ 300MM. They argue that if the Bank is not willing to accommodate them they should take the bulk of the $ 130 million in excess paper they have and use that as their equity to establish similar types of facilities with other banks."

250. This shows AP effectively threatening to remove Springwell's business to another bank if the increase in the facilities was not provided. Other tactics employed by AP to obtain increased leveraged facilities included statements that he was intending to increase Springwell's IMA investments with Chase. There was, of course, absolutely nothing wrong in the deployment of such tactics, but they accurately paint the picture of a shrewd businessman using his commercial position as a means of driving a hard bargain for better terms.
251. In contrast to Springwell's pleaded case and its expert evidence (which suggest that Springwell impugned the proportion of leverage in Springwell's portfolio) AP, with characteristic frankness, accepted in evidence that he really had no complaint at all in relation to the level of leverage in his portfolio; in fact, he said he was "under-borrowing". The following extract conveys the flavour of his evidence on this topic:

"Q. Do you yourself, sitting in the witness box today, have any criticism of Justin in relation to leverage?

A. In relation to leverage?

Q. Yes.

A. No, no.

Q. You do not?

A. We both were happy to do it the way we were doing it.

Q. Yes. Looking back on what happened over the years, you do not criticise yourself for the fact that Springwell took up leverage which Chase offered it?

A. No. You know, you get used to nice things in life, so then I found out -- and then I found out this unbelievable thing that we could borrow cheaper than our principals, like Petrobras and so on, so, you know, we were making money out of nothing. You know, it was good then, but I was not that greedy. I never did over-borrowing. As a matter of fact I did under-borrowing."

252. During the course of the hearing, Chase produced graphs showing the growth in the overall limit of the Hellenic group's margin forward line from April 1992 to November 1993, and the proportion of the Hellenic Group's margin forward line taken up by Springwell. The graphs show that the Hellenic Group's margin forward line increased rapidly. Starting at $ 100 million in April 1992, it had doubled to $ 200 million by January 1993. Two months later, by March 1993, the line had doubled again to $ 400 million. It continued to increase rapidly to November 1993, by which time it had doubled again to $ 800 million. What is striking is not only the speed with which the line increased, reflecting the clear appetite for leverage under the Margin Forward Programme within the Hellenic Group, but the proportion of that line taken up by Springwell alone. The graphs show that, during the April 1992-November 1993 period, Springwell never utilised less than about one third of the overall line. This demonstrates not only that the Hellenic Group as a whole was keen to participate in this market, but also shows Springwell's appetite for leverage.
253. The Margin Forward Programme was a resounding success for the Private Bank. The demand for emerging markets paper among the Hellenic clients of the Private Bank was fuelled by the availability of the programme. By 1994, the total global Margin Forward Programme had expanded to a line of credit of $ 1.3 billion in the two years since its introduction in 1992, and the forecast was for the global programme to grow to $ 2.5 billion over the following twelve months. By March 1994, from the initial four clients approved to trade under the Margin Forward Programme, the number of such approved Private Bank clients had expanded to 70.
254. The evidence showed that the Private Bank credit department internally monitored the Margin Forward Programme extremely carefully. The precise credit requirements of the programme changed over time, as did the precise methods of monitoring and controlling risk, but the internal Chase documentation showed that the programme was, throughout the relevant period, well-managed and closely monitored under the day to day supervision of GG. The following extracts from the evidence given snapshot indications of the type of controls that were in place and being operated at the various times.
255. Thus, in 1993, GG's annual review of the Hellenic group customers' participation in the Margin Forward Programme, he set out the factors that mitigated the credit risk to Chase. These factors included:

i) the clients' financial means, their experience in dealing in emerging markets paper (which went back several years in some cases, particularly, according to GG, in Springwell's case) and the Bank's significant relationships with certain customers admitted to the programme (including Springwell);

ii) the downpayment requirements and monitoring under the Margin Forward Programme; DCCM tracked the customers' trading daily and GG received weekly reports at this time; New York was receiving daily reports on Springwell;

iii) the fact that all paper sold forward had to be approved by DCCM;

iv) in addition, for customers whose downpayments were less than 50% (Springwell and two others) no more than 40% of their portfolio was to be in any one country.

256. By October 1993, the respective roles and responsibilities of the Private Bank and IFI in relation to credit procedures applying to the management of the Margin Forward Programme for sales of emerging markets paper were recorded in a memorandum to GG dated 21 October 1993: IFI was responsible for daily monitoring of the lines on a mark to market basis and would notify the Private Bank in the event of an excess; the Private Bank was responsible for allocating approves lines via a list which would include various specified details and also for obtaining executed documentation from the customer and giving the original copy to IFI; and IFI was to monitor the margin forward report to ensure that the leveraged assets were approved under the IFI programme, that IFI notified the relevant Private Bank contact in the event of a margin call, or if an initial margin amount was not received on an effective date of a transaction, and to liquidate the collateral if a margin call was not met.
257. It was also obvious from the contemporaneous documentation that Chase, as an institution, and particularly the Private Bank's credit department, relied heavily on signed contractual documentation such as MFAs and the DDCS letters in order to monitor and control the risks to Chase in advancing leverage to customers such as Springwell.
258. One of AP'S complaints was that the internal deliberations within the Private Bank credit department were not disclosed to him at the time. AP's evidence is that he ought to have been informed of GG's concerns regarding the content of Springwell's IMA, and the fact that he was unwilling to use certain emerging markets investments as security for Springwell's loan facility. AP criticised Chase because this information was not communicated to him at any stage; he considered that this was important information which should have been passed to him at the time, not only because it related to the content of Springwell's IMA, but also because of the way in which emerging markets investments were apparently viewed; he stated that he "… would have taken very seriously the concerns of a senior credit officer such as Gary Glick" and repeated the same complaints in his evidence in cross-examination.
259. The evidence clearly showed that GG had a firm but sensible style of credit risk management. He was an extremely effective credit officer for the Bank, not rigidly inflexible, but always careful and prudent to look out for the risk areas and to manage that risk in the best way possible in the Bank's interests. It was his job to be conservative and cautious with the Bank's money. It was his job to be a prudent foil to the relationship side of the Private Bank such as FS and also a counterbalance to the salesman on the desks such as JA. As GG himself remarked in cross-examination, "I have been a prophet of thirteen of the last nine country problems". An internal credit audit report produced in May 1995 endorsed the high quality of GG's credit risk management and stated that he had been extremely effective in managing and controlling credit risk in respect of the Margin Forward Programme. In relation to the operation of the Margin Forward Programme in London, the report stated:

"Originally approved in 3/92 as a $ 100million programme, the UK Hellenic programme has grown to $ 1.1Bn ($ 300MM in spot lines and $ 800 million in notional margin forwards). The programme has 20 participants – 12 of which have margin forward availability. Participants may only purchase eurobonds approved by [IFI].

The Hellenics constitute a relatively sophisticated investor base and are comfortable with the risk associated with emerging markets debt. All participants must possess either substantial non-ICM assets under Chase management, sufficient external liquid net worth, or be an existing Chase client. The RM [Relationship Manager] must attest to the client's sophistication and awareness of the risks inherent in emerging markets investments.

Client purchase bonds issued by some of the largest and most creditworthy entities. Contracts require cash down payments ranging between 30% and 50% thus mitigating the risk of price volatility. ICM monitors the portfolio and generates daily reports to track each participants exposure.

The programme is well-managed and closely monitored. The RM is very knowledgeable, files evidence adequate due diligence, collateral values are closely monitored and the margin call process has proven effective."

Principal factual findings in respect of the relationship between the Private Bank and Springwell during EM's time as relationship manager at the Private Bank (1990- 1994

260. My principal conclusions on the evidence, both documentary and oral relating to this part of the narrative of the relationship between the Private Bank and Springwell can be summarised as follows.
261. First, where it suited their purposes (i.e. in order to be granted access to substantial leverage facilities for the purposes of their investment objectives at that time), AP and SP were more than happy to, and frequently did, sign contractual documents containing complicated terms as to non-reliance, sophistication, security and other legal provisions.
262. Second, Springwell's participation, from an early stage, in programmes of this type, showed an ever-increasing sophistication on the part of AP and SP, and an ability to negotiate commercial terms relating to the leverage facilities. The perception of Chase, both in the Private Bank in London and New York, would have been of Springwell as an aggressive and sophisticated client, well able to employ tough negotiating tactics to achieve its commercial ends.
263. Third, as relationship manager at the Private Bank, EM was clearly responsible for the overall relationship between Springwell and Chase, irrespective of, and additional to, the contractual relationships that came into existence as a result of Springwell purchasing specific products or services from CMB or CIBL. In that sense it could fairly be said that the Private Bank's relationship with Springwell was an "umbrella" type of relationship that could potentially have given rise to obligations beyond those contained in the specific contractual relationships between Springwell and the specific product groups.
264. Fourth, I find that the Private Bank credit department, in consultation with EM as relationship manager, put into place certain conditions as to gross credit lines and limitations on the construction and geographical spread of the portfolios of members of the Hellenic Group in relation to emerging market investments, as described above.
265. Fifth, I find that EM was a very active relationship manager, so far as Springwell and other Hellenic Group clients were concerned. For example, I find that, as KOD explained, on frequent occasions he would ring her up, as JA's superior in IFI, and complain to her that JA/IFI had breached or violated various credit or portfolio limits, not only in relation to Springwell, but also in relation to other Hellenic clients. (Her evidence was, in fact, that these complaints were not well-founded.) I also find, as again KOD described, that EM was very concerned to know from a marketing point of view what had been sold to Springwell, and was constantly ringing up to find out.
266. Sixth, I find that the internal memoranda and other evidence shows that EM, far from being concerned, from Springwell's perspective, about the suitability or otherwise of the emerging markets investments that Springwell was buying, was far more concerned to ensure that a greater percentage of the income generated by Springwell's purchases was received by his department. Thus the contemporaneous documents demonstrate that EM was a whole-hearted and enthusiastic proponent of the emerging markets assets sales business conducted between the Hellenic group clients and the Investment Bank. His regular monthly reports within the Private Bank repeatedly expressed delight at the level of sales and the consequential income accruing to Chase, and the Private Bank in particular. In none of those reports did EM express any concern at all as to: the nature of the selling process; the conduct of the Investment Bank; the role of JA; the ability of the Private Bank to undertake supervisory responsibilities; the type of instruments being sold; or any consequential concentration issues within any customer's portfolio. Instead, (and save for complaining that the Private Bank was not obtaining a sufficiently large share of revenue) his reports are universally positive and uncritical.
267. Seventh, I find that EM was, as relationship manager, and as KOD described, in general terms "supervising" the account as between Springwell and CMB. But to the extent that EM and the Private Bank were exercising a monitoring or supervisory role in relation to the suitability of Springwell's purchases, I conclude that they were doing so in the context of discharging the credit control responsibilities of the Private Bank, and of being the person, or unit, within Chase who, or which, was responsible for the relationship with the client, and who, or which, would take the blame if the client failed as a Chase counter-party. EM graphically described in his oral evidence the responsibilities which he had in this respect. EM stated in his written evidence that, after the start of direct dealings between JA and AP, he continued to monitor and supervise what was going on and held himself out as doing so; and that he did this because he regarded Chase's role as a fiduciary role which involved, inter alia:

"… looking after the interests of the customer and ensuring that the customer did not do anything which was not in its own interests which involved conducting thorough due diligence on investments to ensure that they were appropriate".

I reject this evidence in so far as it sought to suggest that the Private Bank during this period was doing so in the context of an investment advisory relationship with Springwell, or of discharging (or purporting to discharge) its obligations under such a relationship to ensure that Springwell received the pleaded type of advice as to the composition of its portfolio or the appropriateness of its investments. Moreover, I reject his evidence that EM, or the Private Bank in London, were "ensuring that the customer did not do anything which was not in its own interests" or were "conducting thorough due diligence on investments to ensure that they were appropriate". There was no evidence whatsoever to suggest that EM, or his department in London, was conducting "thorough due diligence on investments to ensure that they were appropriate" for Springwell's portfolio as part of an investment advisory function. My conclusion on the evidence is that, provided the credit functions were properly managed, EM had no role in approving individual purchases by Springwell from JA, or in respect of wider issues such as the overall balance of Springwell's portfolio. As to the individual purchases, EM accepted in evidence that he had had no background or expertise in emerging markets at any stage in his career, and therefore was not in any position to discharge a role in second-guessing what JA had offered and sold Springwell. Moreover, the only time during this period that country concentration was raised as an issue, was in the context of a credit approval in January 1993. There was no evidence that EM took any other steps to monitor or concern himself with concentration issues, and KOD confirmed that none of his complaints concerned such issues. In fact, the country concentration issue was monitored as part of the credit process in New York. His views as to whether the Private Bank was discharging a "fiduciary role" are inadmissible, but, in any event, they are not supported by the evidence.

268. Eighth, as with the earlier period when EM was in the Shipping Department, there is no documentary material showing that EM, or the Private Bank, ever held the Private Bank out to Springwell as offering the service of general investment advisor, or of wealth manager, or ever held it out as discharging this function. Thus, there is no evidence that AP ever placed an order through EM, or any evidence that he ever discussed any individual product, or the portfolio as a whole, with EM. Nor is there any evidence that, during this period of EM's presence at the Private Bank, AP received any reports, reviews, analyses or other investment advisory materials in relation to his portfolio of emerging markets paper or general, or specific wealth management advice, whether from EM or anyone else. In general, therefore, I found EM's evidence in this area to be exaggerated and unreliable.

(iii) The evidence relating to the period 1994 to 17 August 1998, the date of the Russian default

269. In this section I summarise the evidence which I regard as relevant to the Key Issue whether the relationship between the Private Bank and Springwell, during the period 1994 to 17 August 1998, the date of the Russian default, gave rise to the alleged or any duties of care on the part of CMB, CIBL or CMIL, notwithstanding my conclusion, in a previous section of this judgment, that no duty of care arose as a result of the circumstances surrounding the introduction of JA to AP.

EM leaves the Private Bank in 1994

270. EM left Chase at the end of March 1994. In the summer of 1994, MF was appointed to replace EM, as Head of the European Shipping and Hellenic Group in London, but he only took up his position in September 1994. In effect, from March 1994, FS became Springwell's relationship manager. It was he who dealt with GG in relation to the leverage requests of Springwell although, from September 1994, where problems arose, MF would do so. This continued until March 1996 when SG took over as head of the Hellenic Group. He was, however, based in New York, and would liaise directly with GG from time to time when issues arose that required resolution.
271. By September 1994, the Private Bank Hellenic team comprised, at its head, MF, who had taken over from EM, and his team of relationship managers: in London (FS, and Keith Waller ("KW"), who had no responsibility for Springwell's account), and the Shipping Department under RC; in New York, George Zannos ("GZ") a Relationship Manager, who focussed on offshore Greek clientele and who dealt with IMA accounts that were booked through New York, and who, following SG's departure in 1999, became Head of the Hellenic Group with the Private Bank; and, in Geneva, Achilles Fokiades. The "product specialists", access to whom was permitted to eligible Private Bank clients only, included JA (IFI), Sewanyana Kironde (Investment Management Geneva) and Mark Haines (Capital Markets – financing), among others. There was some debate before me as to whether a structure chart produced in the summer of 1994 before MF arrived in London and entitled: "The Chase Hellenic Team: Team dedicated to XYZ Company", which included JA and the other specialists referred to above in a box at the bottom of the page, unconnected by any lines to the Private Bank boxes at the top, showed that JA was indeed part of something called "the Chase Hellenic Team", and/or was supervised by the Private Bank. The chart showed MF at the top of the page, with direct lines linking him to boxes marked "Private Banking and Investment", "Shipping" and "Piraeus", which respectively contained the names of Private Bank department employees and Shipping Department employees (or, in the case of "Piraeus") a blank. There was then a gap, below which there were boxes showing the various product specialists, including JA, and MF as a derivatives specialist.
272. I cannot, for the purposes of determining the legal issue as to the existence of a duty of care in the terms alleged, place any weight on the inclusion of JA's name in a chart of this sort, even if it does show the existence of a "Chase Hellenic Team". As I have already mentioned, it is clear from his own evidence that, from very start of his relationship with JA, AP knew that JA was in a separate department from the Private Bank.
273. The evidence of MF was that, at most, there was a dotted reporting line running up from JA to MF, JA's principal and day-to-day reporting line being to JA's IFI superiors in New York. MF's evidence, which I accept, was that he saw his role as partially supervising JA, in the sense that, although the personnel in the Private Bank would not have had the skills to supervise JA's emerging markets activities, if, for example, JA had tripled Springwell's credit lines and invested the entire portfolio in Venezuelan securities, MF would have intervened and telephoned JA immediately. Thus there might, in a loose sense, as this chart suggests, have been some sort of "Chase Hellenic Team" in the sense of employees from CMB or CIBL who were involved in the provision of services or products to the Hellenic Group, or the operation of the Margin Forward Programme, but that fact in itself does not, in my judgment, really assist in the determination of the issue as to whether the Private Bank, through JA or otherwise, had a duty of care to give investment advice in the terms pleaded.

The Tequila Crisis

274. The Mexican peso was devalued in December 1994, which precipitated a strong sell-off in the emerging markets known as the "Tequila crisis". JA described it to FS on 22 December 1994 as "the biggest meltdown…in emerging markets' history". A period of instability followed, as the peso continued to lose 50 percent of its value in the succeeding months and contagion spread into other Latin American countries. As a result, spreads on Mexican par and discount bonds widened and the price of bonds fell sharply. Thus spreads on Mexican par and discount bonds increased from about 250 basis points ("bps") on 8 December 1994 to over 600 bps between December 1994 and January 1995. They then fell slightly before widening to about 800 bps by March 1995, when the Government announced a $ 50 billion loan for Mexico. Spreads then began to fall until May 1995, when they levelled off at between 450-500 bps. Spreads on other Latin American par and discount bonds followed a similar pattern.
275. The relevance of this topic is that Springwell's response to the devaluation of the Mexican peso in December 1994 was, I find, an indication not only of its increasing sophistication as an investor in emerging markets, but also an example of its appetite for speculation in risky and uncertain markets.
276. At the start of the crisis, on about 31 December 1994, Springwell had a relatively small proportion of its investments in Mexico, about 13% by face value, or $ 57.18 million. JA had discussed Springwell's exposure in a conversation with FS on 3 January 1995. FS had called him because he had been reading about the Mexican crisis in the papers and was concerned to check whether his clients had been badly hit. JA told FS that there had been a big devaluation in Mexico and the markets had been in turmoil, that some of his clients were sitting on some "pretty substantial" losses, and that one had "got hurt" because of his peso exposure. JA remarked that AP, however, was "in good shape", because "he doesn't have any Mexico because it never yielded enough".
277. JA's evidence, which I accept and is borne out by the documentary records, is that Springwell was keen to capitalise on the crisis and added to its holdings of Latin American assets at the time. AP also recalled in his oral evidence that he and JA felt that that the Tequila crisis was a "good opportunity to buy something cheaper". The evidence shows that Springwell then invested heavily in Mexican and other Latin American securities. Thus, on 22 February 1995, Springwell bought a $ 3 million face value Mexican bond (Pemex FRN) at 93.75 on leverage, and thereafter applied very large sums of money from other maturing bonds on the acquisition of further Mexican securities over the next weeks and months, some at quite substantial discounts to par, which necessarily reflected the greater risk in the investment. By 31 July 1995, the proportion of Mexican assets in Springwell's portfolio by face value had risen from about 13% in December 1994 to about 30%, or $ 140.57 million. MF also recalled that AP told him at around this time that he was thinking about buying cheap Venezuelan bonds at 29 as well.
278. Moreover, although at a meeting at the Polemis' offices on 15 March 1995, AP raised a concern at the sharp fall in values in Springwell's emerging markets portfolio, he did not take any action to reduce his emerging markets portfolio, but, on the contrary, as set out above, bought substantially into Mexico. In his witness statement JA stated that, after the Tequila crisis, AP often expressed regret that Springwell did not invest enough in the Tequila crisis and made it clear that he wanted to look for similar situations elsewhere, so that he could take advantage of other periods of volatility. Although, in his witness statement, AP sought to imply that the Tequila crisis had had little, or no, impact on Springwell's trading strategy, that no-one had described it as a crisis to him at the time and that the pattern of Springwell's purchases did not change, I find this difficult to accept, since Springwell started and continued to invest significantly in Mexico shortly after the crisis struck, which was a significant change in the pattern of its trading. Further, the implicit suggestion that no-one at Chase informed AP of the scale of the crisis at the time, I also find on the evidence to have been unlikely.

Springwell's dealings with Merrill Lynch

279. Springwell's dealings with another investment bank, Merrill Lynch International ("ML"), are also relevant to the story as showing Springwell's actual and perceived sophistication as an investor in emerging markets securities, as well as it enthusiasm for investing in such securities, and, at least on occasions, without the benefit of advice from JA or reference to him.
280. In 1993, Springwell opened a small account with ML, placing $ 2 million on discretionary money management. In early 1996, Springwell opened an emerging markets account at ML, obtaining a leverage facility of $ 43 million, which was soon increased to $ 70 million. Between April 1996 and July 1998, Springwell maintained an active portfolio of emerging markets investments at ML, purchasing bonds with a face value of $ 127 million.
281. Like Chase, ML also classified Springwell as a non-private customer for the purpose of the SFA rules. Springwell signed by way of acceptance ML's letter setting out this classification. On 26 August 1997, the lending at ML was similarly transferred onto a repo programme, under a GMRA, which was the standard form leverage document for repo transactions. The letter was signed by way of acceptance by JB on behalf of Springwell. During the course of the relationship, ML recorded its assessment of Springwell's investments objectives and of the understanding and sophistication of the Polemises. In summary, the assessment of ML was very similar to that of JA and Chase. Thus in 1995 ML classified Springwell as an expert, with a very good risk knowledge. In a detailed client review in 1997, and after AP had met several senior managers of the bank, ML again concluded that AP was an expert investor:

"He has many financial advisors consulting him and he considers himself an expert on emerging markets debt. He studies the market, is informed from research and financial press and from advisors and is his own portfolio manager. Moreover he is an expert on leverage where he has decided to borrow on multicurrency. At the moment it is only in dollars. He decides on the timing and period for the loans. He has a very high understanding and experience of the markets he deals in and the products he invests in. He understands the risk very well and he is able to assess the suitability of recommendations made to him. Most of the time he will not listen to recommendations and will make his own decisions."

282. The ML account was used by Springwell for the transfer of certain assets from Chase to Springwell, so as to bring the account at Chase within the relevant line. There were three transfers in total, two in 1996 and one in 1998. Thus:

i) in early 1996, Springwell had reached its credit limit with Chase. In order to deal with this problem, and to cater for AP's wish to invest further funds in emerging markets assets, on 26 January 1996, Springwell transferred emerging market assets with a market value of $ 73.8 million (face value $ 76.5 million) from Chase to Merrill Lynch.

ii) A second transfer took place on 30 May 1996. Springwell transferred emerging market assets with a market value of $ 40.7 million (face value $ 44 million) from Chase to Merrill Lynch.

iii) The third and final transfer occurred on 23 July 1998. Springwell transferred emerging market assets with a market value of $ 57.8 million (face value $ 75 million) from Chase to Merrill Lynch.

283. In his evidence AP referred to the ML account as an "overflow" account, in the sense that he used it as a further supply of credit to purchase emerging markets assets that he was also purchasing through Chase. However, that was not its sole function. AP also bought and sold many emerging markets assets through ML which were entirely unconnected to the portfolio at Chase.
284. It is not relevant for me to decide what was the nature of Springwell's relationship with ML. Springwell's case is that the nature of its relationship with Chase was markedly different from the nature of its relationship with ML and with SBL; that it had a " non-advisory relationship with ML"; and that, even though recommendations were being made by its salesmen as to what to purchase, Springwell did not rely on ML's advice or recommendations, not only because AP regarded himself as "totally the boss there" and "would not take anything from them" ^[80], but also because:

"insofar as Springwell made investments in emerging market paper with ML in and after 1996, AP relied on JA's advice and recommendations in dealing with ML and he did not receive advice from ML".^[81]

285. However, the following points arising out of the ML purchases are relevant to the determination of the issue as to the nature of Springwell's relationship with Chase, and also to questions as to breach, reliance and causation:

i) I do not, on the evidence, accept Springwell's pleaded case, as set out above, that every decision which was made with regard to the ML account was made in reliance upon advice from JA. It is correct that the transcripts record AP discussing with JA certain recommendations that ML have made to him and asking for JA's views about those recommendations. It is also correct that JA, in a telephone conversation with the in-house investment advisor to another Hellenic client, bragged that he also "sort of managed" Springwell's ML portfolio as well as that at Chase. However, the evidence also showed many examples of investments having been bought without any reference to JA and, indeed, examples of investments being either bought, or not bought, through ML against JA's recommendations. Many of the purchases made by AP from ML were entirely unknown to JA and there are examples on the transcripts of telephone calls between JA and AP, where AP tells JA that he has made a particular purchase or sale at ML, in the absence of any prior discussion with JA. If, as he strongly contended, and the internal ML detailed client review reported, AP did not act on the basis of ML's recommendations, then Springwell's decision to make such purchases could only have been taken on the basis of AP's own assessment, even though this is something which, according to Springwell's pleaded case, he was "never in a position to do because he lacked both the information and expertise to do it".^[82] I conclude that the facts relating to the ML portfolio are supporting evidence of AP's experience and sophistication by this stage as an investor in emerging markets.

ii) ML marketed similar types of product to Springwell, including GKO Linked Notes, as Chase did. The principal reasons, it appears from the evidence, that the relationship with ML did not flourish as much as the relationship with Chase were that: (a) ML required a fixed measure of geographical concentration for leveraged purchases which irritated AP; and (b) they also made the mistake on occasions of trying to sell him assets over par, rather than the "cheap" and "distressed" assets that he consistently sought from JA. This is relevant to Springwell's claim that Springwell had an extremely conservative attitude to risk and that, had Chase advised Springwell as to the dangers associated with geographical over-concentration for leveraged purchases, Springwell would have acted differently.

iii) AP would use his relationship with ML as a lever for his transactions with Springwell, and vice versa. For example, he would ring up and compare prices that each bank respectively had on offer. ML also, on occasions, provided AP with market information, in addition to their recommendations. For example, in 1997, it sent AP a lengthy 40 pages report on the Russian Banking System, which AP told JA that he had read and found interesting. Again, this is indicative of AP's sophistication and ability to make decisions on his own as to what investments to make..

The build up of Springwell's Russian Portfolio

286. It is necessary, as part of the chronological narrative (which is relevant not only to the determination of the issue whether Chase owed a duty of care to advise Springwell in the broad terms pleaded, but also to other issues) to describe the circumstances in which Springwell built up its portfolio of Russian securities, and the types of securities which comprised the majority of the latter's portfolio at the date of the Russian default. It is clear from the evidence, including the transcripts of their telephone conversations, that, during the period when Springwell was building up its portfolio in Russian securities, JA and AP had wide ranging discussions about what AP should buy and the nature and terms of the relevant securities. I find, as was accepted by Mr. Hapgood on behalf of Chase, that JA gave recommendations to AP about such investments; I also characterise those recommendations as "advice". But I also find that the decision whether, and how much, to invest, was invariably taken by AP himself.
287. In May 1997, by which time Springwell had been investing in Russia for over a year, AP went with JA on a trip organised by Chase to the Ukraine and Russia. AP's evidence was that it was this visit to Russia that was the catalyst for an increase in Springwell's investments in Russia in the second half of 1997.
288. The trip to the Ukraine and Russia took place over the period 18-23 May 1997, with the Sunday, Monday and Tuesday, 18-20, May spent in the Ukraine and the Moscow limb of the trip scheduled over the period Wednesday 21 to Friday 23 May 1997. The trip was organized by Chase and similar trips had been arranged for other markets. The formula was that Chase traders would travel to a particular country with a group of key investors to meet with local policy officials, analysts and others involved in the financial markets. Chase's guests would attend a number of seminars with these experts and also spend time socializing with each other. The purpose of the trip to Russia was for select institutional and large private investor clients of Chase to become more familiar with the Russian markets. Around twelve or so Chase customers, including AP, attended the visit to Russia, including two other Hellenic clients. The trip was not just focused on Russian government issues, but also focused on the banking system generally. There were meetings with representatives from the Russian Central Bank and the Ministry of Finance among others.
289. JA's evidence was that the visit appeared to be a success; his impression was that the speakers confirmed the government's commitment to economic stability, emphasizing in particular four elements of macroeconomic policy: a stable currency, realistic inflation targeting, a workable budget and a workable tax regime. He felt that the message presented had been a very positive one, and that those invited left Russia in an optimistic frame of mind about the country and its prospects.
290. AP, not surprisingly, since it was so long ago, did not have a very clear recollection of the detail of the trip; but he too generally confirmed in his evidence that the four elements of macroeconomic policy had been the subject of the talks; that the speakers gave the impression that there had been a measure of economic stability achieved, that the Russian Government had made enormous progress in reducing inflation in Russia by May 1997 and that the Russians had recognised the problem of tax collection and committed themselves to do something about it; and that the speakers on behalf of the Government had been talking positively about the country. He said that he had enjoyed the visit to Russia and, having visited it, became more comfortable with the idea of making Russian investments, because he had gained a sense of the normality of everyday life in Russia which he had not known before the visit.
291. June 1997 was, as AP correctly described it in evidence, the peak of the emerging markets bull market where extraordinary profits had been made in emerging markets investments. After this, and beginning with the start of the Asian crisis marked by the fall in the Thai baht on 2 July 1997, the market began its downward trend. Although AP was reluctant to accept the word "spectacular" in relation to the profits he had made over the period, it is clear that his portfolio had, to his knowledge, been extremely profitable, and in fact, he used the word "spectacular" himself a few days later in evidence to describe the profits made during this time. However, the corollary to this bull market was of course that yields had been falling and prices rising, which meant that AP was finding the existing emerging markets countries of Latin America and Brazil expensive.
292. I also conclude, however, that AP, astute and realistic as he was, was well aware in a general sense that there remained problems with the Russian economy, and that these economic problems were reflected in the higher yields available in Russia as an inducement for investors to invest in that country, but that higher yields carried with them the corollary of increased risk.
293. It was also clear from the evidence, that AP was attracted to the higher yields being offered on Russian investments, as Russia was being feted as the next big opportunity in the emerging markets universe. He clearly, at this time, understood the point that, in order to attract capital, it was necessary for Russia to offer higher yields, because of the risks of investing in Russia. That was, as he recognised, consistent with his earlier experience in investing in Brazil. He clearly appreciated that, despite the greater risks involved, the market was keen to invest in Russia because of the high yields being offered.
294. AP and JA discussed this aspect of market perception of Russia in a conversation on 20 June 1997, when comparing Russia with Ecuador, as follows:

"AP: So the thing is do we buy the Russian.

JA: Yeah I think you buy well we think it's gonna go up at the moment you're basically buying it at the re-offer price so …

AP: Well you thinking it's gonna go up to er you know if the market remains stable as well and act like it is now.

JA: No, it doesn't, regardless of what happens in interest rate market we think the natural, the correct pricing for it is between 325 around 325 now 325 is faced to a price that's three points higher than this ….

AP: But why, why should we go and buy Ecuador with higher yield as you say?

JA: Um it's, it's um that's a not as good a credit it's a much, it's a much different credit you know?

AP: I know but so what?

JA: Well because the underlying.

AP: All, all the credit is, is, is er the market is er is er a lot more dangerous now than what it used to be.

JA: Yeah, but …

AP: Because people are are are buying er

JA: I agree without, without thinking about what they're doing, which is what …

AP: Because, because they are, because of the yield coming …

JA: Yeah, which is all the more reason …

AP: Down there's going to be more a risky portfolio.

JA: Yeah, exactly.

AP: The portfolio today of everybody is one percent more risky than it was a year ago.

JA: It probably …

AP: Or 10 percent.

JA: Probably 10 percent more risky

AP: That's what I'm saying

JA: I would agree with that I would agree with that but that is why I would say …

AP: It was not because of a policy decision in terms of taking higher risk it is totally utterly you know only because of the yield.

JA: I agree everyone's desperate for the extra yield but the point is here you're getting er er a bit of both you're getting a good credit and some extra yield. You know Russia's is to, to, you know become a huge part, Russia is as important to the market now as either Brazil or …

AP: I know it is but we do not know what the economy of Russia is doing it might be shitty

JA: Well we do know, we know, I mean if you …

AP: Maybe maybe all this money going in to Russia just because there's nothing else paying such high yields.

JA: Well there's an element of that.

AP: That's that's the only reason.

JA: Yeah it's not just because of the high yields but there are …

AP: That's the only reason.

JA: Well there's good fundamentals why the, why the money should go in there, no obviously there are still concerns you know, in Brazil 18 months ago, you know the President got impeached, you know I mean these things happen, I mean but you're buying underlying. you're underlying you're, you're recognising that we have what is basically a good credit here whereas Ecuador is a slightly different ball game." ^[83]

295. The evidence showed that AP, along with many other emerging markets investors, increased investment in Russia during 1997 because Russia was offering high yields and was perceived by the market as the obvious next big opportunity, with liquidity by virtue of being a large country, as was Brazil. In fact, between 30 June 1996 and 30 June 1997, the face, or nominal, value of Russian investments in the Springwell portfolio increased from 2.5%^[84] of the portfolio to 29%^[85] of the portfolio. By 31 October 1997 Russian investments in the Springwell portfolio constituted 39.4% of the portfolio by market value and by 31 December 1997, this proportion had increased to 42%.^[86]
296. If one aggregates the Russian holdings with debt instruments issued by borrowers in other states of the former Soviet Union, the position (as summarised in Appendix 1 to the RADC) by 17 August 1998 was that 53.26% by original investment value of Springwell's portfolio at Chase was invested in paper issued by borrowers in Russia or the former Soviet Union. Of these investments:

i) 26.72% by original investment value comprised GKO-linked Notes;

ii) 25.70% by original investment value comprised Prins and IANS (and there was a further $ 10,787,500 of Prins by original investment value which Springwell had purchased from Chase in June 1998 but which had then been transferred to ML on 23 July 1998); and

iii) 47.58% by original investment value comprised other Russian and former Soviet Union investments.

297. There were 11 GKO-linked Notes, all but one of which had been purchased in the first seven months of 1998. They had various maturity dates between September 1998 and January 1999.
298. Springwell also held very large positions in four Russian bond issues namely Tatneft ($ 25 million, purchase price $ 23,425,700), Unexim ($ 14 million, purchase price $ 13,398,700), Rossiyskiy Kredit ($ 16 million, purchase price $ 15,414,970) and VTB ($ 25 million, purchase price $ 24,487,500).

Investments in Russia available to the international capital markets in the 1990s

299. The reports served by the respective parties' experts on Russia and emerging markets set out in detail (and with limited areas of disagreement, many of which were of perception and emphasis), the history of Russia's transitional economy, following the dissolution of the Soviet Union in 1991, and its integration in the global economy. There were three principal sources of external funding to the Russian government during the 1990s:

i) Multilateral credits from the international financial institutions, particularly the International Monetary Fund ("IMF") and the World Bank;

ii) Export credits from bilateral official sources; and

iii) Inflows of capital from non-resident investors attracted by the high yields in certain Sovereign Russian debt instruments and, to a lesser extent, in the Sovereign Eurobond market.^[87]

It is this last category of investments in which Springwell invested.

300. As Mr. Kraus described^[88], Sovereign Russian debt instruments available to international investors at relevant times during the 1990s primarily fell into three categories: (a) restructured debt of the former Soviet Union; (b) new sovereign dollar-denominated Russian Federation debt; and (c) local currency Russian internal sovereign debt (initially off-limits to non-resident investors, but subsequently made available via the S-Account regime). There was also a range of corporate and sub-sovereign Eurobonds which were issued during 1996 and 1997. The reports show, in effect, that Russia opened its doors to the international capital markets in 1996, through the combination of allowing foreigners access to the GKO market and the issue of the first sovereign Eurobond in November 1996. Throughout the period to the Russian default in August 1998, these two sources of international capital remained important to Russia.

Springwell's investments in GKO-linked notes

301. In March 1996, Springwell, which by this time had amassed a very sizeable emerging markets portfolio, started investing in Russia. As JA stated, and I find, in this respect Springwell was no different from many of JA's other customers, because, for an experienced emerging markets investor, there appeared to be very great potential in Russia, with the prospect of significant returns.
302. Springwell's first two purchases in Russia were two GKO-linked Notes, purchased in March and May 1996, both containing foreign exchange hedges and both at rates of interest of 18% per annum.
303. The expert reports showed that the Russian Ministry of Finance started to auction short term zero coupon rouble-denominated securities, issued by the Russian Federation and known as "GKOs", in May of 1993 to fund the Russian budget deficit. The bonds were initially restricted to Russian resident accounts and were not available to offshore investors. Although GKOs financed a small part of Russia's deficit in 1993 (about 0.1% of GDP), gross issues were increased significantly in 1994 and the market in GKOs took off between 1995 and 1997.
304. In June 1995, the Russian authorities moved to increase the rouble debt market by introducing OFZs, which were coupon bonds denominated in roubles with maturities of between one and two years. Interest was paid quarterly at a variable rate linked to short-term average GKO yields and principal on maturity. Fixed coupon OFZs were introduced in 1997.
305. The main investors in GKO market at the outset were Russian banks, but foreign investors soon started to show a keen interest in the market. JA gave evidence that GKOs were attractive to his clients, because they offered a higher yield and a shorter term than treasury bills from many other emerging market sovereigns; his view was that, in the context of emerging markets investments, sovereign paper was perceived to be a better quality credit risk than corporate paper; further, his view was that, because GKOs were denominated in roubles, rather than in foreign currencies, that reduced the perceived risks of government default still further. In order to avoid the restrictions in relation to offshore ownership, a number of Russian and international banks developed pass-through, or derivative structures, whereby GKOs were held by a nominally Russian structure, which in turn issued participation rights to offshore investors, or via similar "grey" structures, allowing foreign investors to own them indirectly. These derivative structures either provided outright exposure to domestic rouble denominated debts, or provided such exposure, combined with a deliverable or non-deliverable currency hedge.
306. However, after intense lobbying from foreign investors, the rules were changed in 1996 to allow direct participation by non-residents in the GKO market. Initially, this was done by a complex system involving placing dollar deposits at the foreign subsidiaries of the Russian Central Bank ("CBR") for a guaranteed return in dollars. The effective dollar returns from this scheme were quite high and the scheme was profitable for foreign investors. The next stage in the process was a CBR order of 26 July 1996 enacting a regulation which, for the first time, allowed non-residents to invest directly in the GKO markets. This was done through "S-Accounts" held with authorised Russian banks. The S Account regime was an integral part of the mechanism devised by the Russian authorities for non-resident investment in GKOs and the repatriation of funds realized from these investments. An investor would sell dollars for roubles which would be credited to the S Account and used to buy GKOs. Repatriation of the balance on the S Account initially required entering into a 6-month forward contract with an S Account bank. The waiting period was subsequently reduced and by early 1998 all restrictions on capital outflows were lifted. However, many non-residents still sought to hedge their currency exposure with large Russian commercial banks.
307. Figures from the IMF demonstrate the popularity of GKOs with non-resident investors. Non-resident investment in GKOs and OFZ totalled $ 6 billion in 1996, $ 10.9 billion in 1997 and $ 2.8 billion in 1998. By June 1998, non-resident holdings of GKOs and OFZs amounted to about one-third of the total amount outstanding.
308. Those responsible for trading Chase's proprietary book perceived Russia as a major opportunity in early 1996. Daniel Pinto ("DP"), who worked at IFI in London, and at that time was Head of Local Markets with responsibility for trading in all local markets across CEMEA,^[89] and who subsequently, in 1997, became Managing Director of IFI and Member of Chase's Working Committee), stated that it was "super hot". Fatma Can ("FC") (then Head of Treasury at CMBI in Moscow,) described a sense of optimism in Russia at the time: how all the hotels in Moscow were full and "it seemed as though everyone wanted to invest in Russia".
309. Chase started trading in GKOs and OFZs in early 1996 through CMBI, for its own proprietary account. Having started to trade GKOs and OFZs, Chase then looked to develop ways in which its customers could invest in the market. The evidence showed that feedback from Chase's emerging markets salesmen suggested that there was strong customer interest in structured (i.e. derivative) notes, which would have allowed customers exposure to the GKO market without directly investing themselves; it appeared that, in such a manner, investors felt that they could avoid many of the operational, legal and documentary complications associated with the S Account regime; further, many considered themselves better off investing through large financial institutions rather than directly, should problems develop in the future.
310. Against this background, Chase's Structured Products Group developed a structured GKO-Linked Note, which Chase intended should pass through to investors the return, as well as the full risks, of making the underlying GKO investment. GKO-Linked Notes could also have foreign exchange hedges embedded in them, so that an investor could purchase a note denominated in dollars and receive a return in dollars at an agreed rate, leaving the institution to purchase the GKOs in the domestic Russian market, and a Russian bank to take the foreign exchange risk of converting the proceeds into dollars at maturity. Chase was not alone in developing structures to allow investors access to the GKO markets. Structured investments similar to GKO-Linked Notes were very common at the time, with many banks offering similar products.
311. The evidence showed that, prior to the default, Chase would make a market should its customers wish to sell Chase back a GKO-Linked Note, thus absorbing the referenced GKO back on to its net proprietary book position. In evidence, DP explained that

"in normal market circumstances it is very unlikely that we are not going to provide liquidity to clients. We always do".

As DP explained, this would be particularly so for an important client like Springwell. However the price offered would reflect the underlying market conditions. Thus, if a customer wished to exit its position in a Note, then it would be provided with a price reflecting the current market price of the underlying GKO trading on the secondary market and the cost or profit of terminating the forward. Consequently, there would have been little room for a customer to negotiate on price; however the position would have been no different had the customer been selling directly back into the secondary market.

312. Chase did not have a separate proprietary desk responsible for trading GKOs and OFZs on the bank's own account. Instead, its market-making trading desk held GKOs referenced in GKO-Linked Notes for customers and also held GKOs for the bank's own account. Chase's net proprietary position was thus comprised of the total amount of GKOs and OFZs it held on its books (the inventory) minus those GKOs referenced in its customers' GKO-Linked Notes. The same position subsisted as regards forward contracts entered into by Chase. Chase viewed the pool of GKOs and OFZs on a global basis, with the same risk, such that it did not apparently analyse its GKO positions separately from its OFZ positions.
313. By August 1996, foreign investors were allowed to participate directly in the primary and secondary rouble debt markets just as resident investors but the Central Bank imposed certain restrictions as regards the timing of repatriation of the proceeds.
314. In February 1997 the authorities announced that capital restrictions on outflows would be lifted by the end of the year. Indeed, by early 1998 all restrictions on repatriation were lifted. Transactions were still carried out through "S" Accounts but there was no waiting period. However, many non-residents sought to hedge their exposure with large Russian commercial banks. By the time of the August 1998 default, the non-resident holdings of GKOs and OFZs accounted for about one third of the total amount outstanding.
315. From 28 March 1996 until the time of default, Springwell invested on a recurring basis, and, for the most part, successfully, in GKO-Linked Notes. Springwell bought a total face value of $ 428.6 million GKO-Linked Notes through Chase, with a purchase consideration of $ 429.6 million (42 separate purchases). Of these, a total of $ 325.4 million matured at par before the 17 August 1998 default, realising a total net gain on the non-impugned GKO-linked Notes after coupon and financing costs of $ 19.9 million for Springwell. One holding was sold back to Chase by Springwell in May 1998 for $ 16.5 million, producing a net gain after coupon and financing costs of $ 404,473.
316. By 17 August 1998 Springwell held 11 GKO-Linked Notes in its portfolio, with a total purchase cost of $ 87,837,270 and a nominal maturity, or redemption, amount of $ 95,259,716. These were referred to at trial variously as the "Failed Notes" or the "impugned Notes".
317. With the exception of one Note which was unhedged, all the GKO-Linked Notes which Springwell bought were hedged with a Russian bank. Until June 1997, this was either Evro Finance (a CBR subsidiary), Banque Commerciale Pour L'Europe Du Nord – Eurobank (the majority of the shares in which were owned directly or indirectly by the CBR), or CMBI. The position changed in June 1997, when Springwell started to buy Notes hedged with one of two Russian private banks, namely Imperial Bank and Inkombank. From November 1997 onwards, Springwell also bought Notes hedged with two Russian state-owned banks, Sberbank and VTB. The precise details of the purchases of the impugned Notes are set out in Appendix I to Springwell's closing submissions.

The relevant terms of the GKO documentation

318. There are essentially three categories of relevant GKO-Linked Note documentation (the wording changed over time but was of a broadly similar nature):

i) the GKO-Linked Notes themselves: these were issued by the relevant entity (CMSCI in the case of the later Notes) to "The Chase Manhattan Bank, London Branch" (i.e. CMB") as Holder. The reason for this was that although, contractually, there was an agreement between CMSCI (as issuer) to issue the relevant Note to Springwell, as the trade confirms for the Notes confirm, because of the financing arrangements (latterly the GMRA) pursuant to which Springwell sold the Notes when issued to CMB, and then itself repurchased them when its obligations under the financing arrangements had been satisfied in full, the notes were issued directly into the name of CMB, the relevant non-transferable and non-negotiable provisions of the Notes having been waived.

ii) Terms and conditions sheets and risk disclosure sheets: these confirmed the terms and conditions of the Notes and included a "Risks Disclosure" statement. Chase contends that they were faxed to Springwell, and in some cases signed and returned.

iii) Confirmations: these confirmed that a particular note had been issued by CMSCI to Springwell and set out the commercial terms of the particular note. Chase contends that they were faxed to Springwell, and in some cases signed and returned on Springwell's behalf.

319. The GKO-Linked Notes contained the following express acknowledgements and warranties:

i) Section 5. "Other Risks Assumed by Holder" provided as follows:

"In addition to those risks assumed by the Holder as described elsewhere in this Note, the Holder expressly acknowledges and agrees that:

(a) Transactions entered into in connection with this Note will be subject to the laws and regulations of Russia, Including the S Account Rules, currency regulations and tax laws, as such laws and regulations may be applied, Interpreted, amended or changed from time to time, and the Dealer Agreement as amended or changed from time to time which may affect the execution, availability and terms of the Transactions and may also affect the amount or currency of payment of the Redemption Amount or delay payment under this Note.

(b) The Russian legal system is still under development and Russian legislation and regulation change rapidly, and such changes may adversely affect the legality or enforceability of a Transaction or may make such Transaction more costly, which costs may be deducted from the Redemption Amount or which changes may otherwise affect the obligations of the parties under the Transactions. Many of the Russian laws and regulations are new and untested, are unclear and imprecise in their drafting and contradict other laws. Legal acts may be enforced retroactively and Russian authorities may change their interpretation of existing legal acts and lack judicial or administrative guidance on interpreting the applicable rules. Russian laws and regulations are not always consistent with market practices, resulting in ambiguities, inconsistencies and anomalies. For example, the documentation for a forward contract or option contract with a Russian counterparty by means of a Reuters)Swift confirmation may be inconsistent with the Russian legal requirements for following certain signature formalities for financial agreements and may affect the enforceability of such contract.

(c) The Holder assumes all risks of all Transactions entered into in connection with a Note. Payment of any Redemption Amount may be reduced or made In Roubles or In Designated GKO Assets or Interests therein, if payment Is not made or if CMIL does not receive payment under the Designated GKO Assets or any of the other Transactions or such payment may be reduced or delayed due to the nonperformance or default of any direct or indirect party to a Transaction (including CMBI and the Russian Bank Counterparty, If applicable) for any reason. The Holder also• assumes the risk of the increased costs or expenses due to any replacement transaction entered into to replace a defaulting or non-performing party (including, entering into a market rate replacement foreign exchange transaction in the event of a default under a Designated Forward Transaction or the forward contract with the Russian Bank Counterparty (if applicable)) or the costs or expenses of termination or unwinding any remaining Transactions. If any replacement transaction is entered into, then the Holder will bear the risk of the counterparty nonperformance or default in such transaction.

(d) It may be difficult, impossible or prohibitively expensive to obtain or enforce a judgment against any direct or indirect party to a Transaction. Chase and its affiliates shall not be obligated to bring any action against any party to a Transaction.

(e) CMSCI has not made any representations and warranties whatsoever, either expressed or implied, including, without limitation, any representation or warranty as to (I) the due execution, legality, validity, adequacy or enforceability of the Designated GKO Assets or any other Transaction or any document relating thereto; (ii) the financial condition of any party to a Transaction or the performance 01 any party to a Transaction of any of their obligations related to any Transactions or that it has made, or will make, any inquiries concerning any such parties; and (iii) as to any tax matters related to the Transactions or investments in S Accounts; and (iv) as to the content of or the applicability of the S Account Rules. Chase shall not have any duty or responsibility to provide to the Holder with any credit or other information concerning the affairs or the financial or other condition or business of any party to the Transactions which may come into the possession of Chase.

(f) This Note has liquidity risk and is highly structured and nontransferable and there may not exist at anytime a market for this Note. Although Chase, at its discretion, may provide a re-purchase bid price for this Note if requested, Chase is under absolutely no obligation to do so and in any event, may be unwilling or unable to provide a bid due to disruptions or illiquidity in the Russian securities or foreign exchange markets, including changes in regulations, taxes or other government restrictions. In addition, any repurchase bid price for this Note would reflect all costs associated with any early termination of Transactions."

ii) Section 6 provided inter alia as follows:

"(a) The Holder hereby represents and warrants to CMSCI (for itself and on behalf of CMIL) that ….

(v) it has the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of this Note and it has determined that purchasing this Note is appropriate in tight of the Holder's business strategies and objectives;

…

(c) The Holder acknowledges that it understands the risks and potential consequences associated with purchasing this Note, that it has made such independent appraisal of Russia and its economy and legal and political circumstances as the Holder deems appropriate and has consulted with legal, investment, ERISA, accounting, tax and other advisors to the extent appropriate to assist it in understanding and evaluating the risks involved and the consequences of purchasing this Note, the content of the S Account Rules and the effect of such rules on the Transactions, and the tax treatment of the Transactions and any investments through S Accounts; and that it has been given access to all information about Chase, the Transactions, the parties to the Transactions, this Note, Roubles and the Designated Assets that the Holder has requested for purposes of any such evaluation. In addition, the Holder has not relied on, and acknowledges that neither CMSCI nor CMIL has made, any representation or warranty with respect to the advisability of purchasing this Note."

320. The terms and conditions sheets, which referred to Springwell as the client, and which Chase contends were sent to, and signed on behalf of, Springwell summarised the structure of the transaction. The following provisions are relevant:

i) a footer in small print on the first, second and third pages of the document, provided:

"Clients are advised to make an independent review and reach their own conclusions regarding the legal, credit, tax and accounting aspects of this offering relating to their particular circumstances. Neither Chase Manhattan International Limited (CMIL), nor The Chase Manhattan Bank (Chase), nor any person acting on their behalf, makes any representation or warranty, implied or express, regarding the accuracy, completeness or currentness of the information contained herein. We or a company or a person connected or associated with us may be an underwriter or distributor of, or a market maker or otherwise hold a long or short position or a principal in, a security or financial instrument (or in options, futures or other derivative instrument thereon) which has been discussed herein."

ii) The summary of "Note Repurchase" on the second page provided:

"The Notes are illiquid and not actively traded in any financial market. Although Chase, at its discretion, may provide a re-purchase bid price for the Notes if requested, Chase is under no obligation to do so and in any event, may as a result of market conditions, be unable to provide a re-purchase bid price if requested. Any repurchase bid price for a Note would reflect all costs associated with early termination, including the costs associated with the S Account restriction on convertibility of Roubles."

iii) Above the signature, on behalf of the client, the document read:

"The undersigned accepts and agrees to these Terms and Conditions, including the attached RISKS DISCLOSURE."

321. The attached risks disclosure sheet, in turn, set out the list of "Key Risks to Investor", including by way of example:

"All default, loss or other risks with respect to the transactions with respect to the Notes, including transactions relating to the purchase of the underlying instruments, redemption of the underlying instruments and exchange of the maturity proceeds of the underlying instruments into Dollars.

Default risk of the Russian government on the underlying instruments.

Default risk of CMBI as counterparty to CMIL on the international forward contract.

Default risk of the Russian Bank counterparty as counterparty to CMBI on the local forward contract.

Custody default or loss risk

…

Risk of the inability to convert roubles to Dollars.

Risk of imposition by the Russian government of changes in law or regulations, including S Account regulations, which may affect the return on the Underlying Instruments and Forward Contract. The Investor acknowledges that it has made such investigation of the S Account regulations as it deems necessary and that Chase has made no representations with respect to the S Account regulations.

In the event that CMSCI, in its sole discretion, anticipates that it shall incur after the Note Maturity Date any costs or expenses which could be deducted from the Redemption Amount, it may reduce the Redemption Amount by such amount in anticipation of such payment."

322. Further, the GKO-Linked Note confirms, many of which Chase contends were signed by Springwell, contained the following express statements:

"This is to confirm that a 10.00% Linked (S Account) GKO Note (the 'Note') has been issued by Chase Manhattan Securities (CI) Ltd to Springwell Navigation Corp. (the 'Customer') on July 20, 1988.

…

In connection with the financing of the purchase price of the Note from the Chase Manhattan Bank, London Branch, the provisions of the Note that render it non-transferable and non-negotiable will be waived for the purpose of selling the Note to The Chase Manhattan Bank, London Branch and the subsequent transfer to the Customer of the Note when its obligations in connection with such financing have been satisfied in full. In further of the foregoing, it is agreed that the Note will be issued in the name of The Chase Manhattan Bank, London Branch

The Customer hereby represents and warrants that it has read the Note and understands the terms of the Note.

A summary of the terms of the Note are in the attached Terms and Conditions sheet. Please confirm your acceptance of these terms by signing this confirmation and faxing it [to Chase]."

The circumstances in which the GKO-linked Note documentation was signed

323. Because of various points taken in its pleadings and in argument by Springwell as to the effect of the relevant provisions in the GKO-Linked Notes, terms and conditions sheets with risk disclosure sheets, and confirmations (collectively "the GKO-linked Note documentation"), it is necessary to summarise in some detail my findings on the evidence as to the circumstances in which the GKO-linked Note documentation was signed. There was also a dispute of fact between JA and AP as to what actually JA told AP in relation to risk disclosures at the time of the purchase by Springwell of its first GKO-linked Note, although that evidence was rather more relevant to issues of breach rather than the existence of a duty to advise.
324. In its pleaded case and initially in its evidence, Springwell denied that it had ever received any copies of the GKO-Linked Notes themselves at any time prior to the Russian default. Thus:

i) at paragraph 132 of the RADC it alleged that "Chase did not supply any copies of the GKO-Linked Notes themselves to Springwell until after the collapse in August 1998 …."

ii) AP supported this plea in his witness statement when he "confirmed" on two occasions that he had not received copies of any of the Notes at the time. In cross-examination he initially said the same thing, until the actual documents and their fax markings were pointed out to him.

iii) SP gave evidence to similar effect in his second witness statement. When describing the post-default situation, he said:

"We did not have copies of "The Notes" for any of the Failed Notes or any other GKO-Linked Note Springwell had previously purchased. In fact, I found out that none of "The Notes" had ever been sent by Chase to Springwell".

iv) Springwell also refused to admit, in its pleadings, that:

"… any person on behalf Springwell signed any note confirmations or term sheets for the GKO-Linked Notes and Chase must prove this in relation to each transaction to which such documents are said to be relevant"^[90]

other than one terms sheet signed on 27 July 1998 (which Chase had referred to in its pleadings and which it could not deny).

325. As a result of this position taken by Springwell, Chase lead detailed evidence from Giovanni Di Miceli ("JDM"), who was in charge of Structured Products documentation at IFI in New York at the time, as to the process by which the GKO-Linked Note documentation was produced and dealt with. Chase also cross-examined AP in some detail about individual documents and records which demonstrated that many of the documents had, contrary to Springwell's pleaded case, in fact been sent and/or signed, (it not being possible, given the elapse of time, of presenting a complete documentary record relating to each GKO-Linked Note). In the light of this, SP produced a further witness statement, in which he attempted to characterise his previous statement that he had "found out that none of "The Notes" had ever been sent by Chase to Springwell" as him having merely "formed the view that the "Notes" had never been previously sent by Chase to Springwell." JA also gave evidence in relation to the topic.
326. My conclusions on the evidence relating to the general process by which GKO-Linked Note documentation was produced and dealt with, and the specific manner in which Springwell conducted its GKO-Linked Notes trades are as follows:

i) sales staff (such as JA) were told that it was necessary to ensure both that their customers were informed of the risks of the new product and that they sign a terms sheet confirming that they understood those risks. As a result, JA's general practice was that he sent the sample documentation (which was essentially a blank trade confirmation, with the associated terms sheet and risk disclosures) to all of his customers to whom he intended to introduce the GKO-linked Note product. Subsequently, he would telephone the customer to whom he was introducing the GKO-linked Note for the first time, and go through the various risk disclosures. I accept that he adopted this practice in Springwell's case.

ii) By at least 1998 there was an established documentary process for the sending out of necessary documents and the chasing up of outstanding paperwork.

iii) So far as Springwell was concerned, each investment in a Failed Note was initiated during the course of a phone conversation between JA and AP in which AP agreed to make the investment. The trade was executed either during that conversation or as a result of it.

iv) For each trade, the process was that the following documentation would be produced: (i) a terms and conditions sheet (with a Risks Disclosure statement attached); (ii) a GKO-Linked Note; (iii) a two page trading confirm; and (iv) a repo confirm (if the trade was being financed).

v) The trading confirm, (issued in the instant case by CMSCI to Springwell) would have attached to it the terms and conditions sheet (and Risks Disclosure statement) as a four or five page document. This would be sent by fax to the customer, either on the trade date, or, perhaps, a week or so later after the settlement date, to be signed and returned by the customer. The repo confirmation would also be sent separately by fax.

vi) In the case of Springwell, the confirm usually bore the same date as the trade date, although the fax annotations on some of the documents apparently show that some of them were faxed after the settlement date; the confirm stated that a GKO-Linked Note "has been issued by [CMSCI] to [Springwell] (the "Customer") on" a stated date, which was the settlement date, which was usually 4 or 5 days after the trade date; in addition to the commercial terms of the Note, the confirm recorded the obligation of the Holder to pay the Consideration Amount on the settlement date, and that upon receipt of that payment CMSCI would fax a copy of the Note to "the Holder" for signature. Because each of the Failed Notes was leveraged, "the Holder" was CMB, and it was thus CMB who was to pay the Consideration Amount; he confirm also recorded (as quoted above) that, because of the financing, the non-transfer/ non-assign provisions were to be waived because the Note was to be sold by Springwell to CMB, and subsequently re-sold to Springwell, and that it was agreed that "in furtherance of the foregoing" the Note was to be issued to CMB. Although the precise position was clear from this wording, the previous statement that the Note "has been issued by [CMSCI] to [Springwell] (the "Customer")", was incorrect in the sense that the Note had in fact been issued to CMB, albeit at the direction of Springwell, which, having acquired the contractual entitlement to the issue of the Note to itself at the trade date, was on-selling the Note to CMB under the financing arrangements. Mr Brindle sought to make something of this point, but in my view it was irrelevant to the issue of Springwell's awareness of the relevant provisions of the GKO-linked Note documentation.

vii) Following payment by CMB of the Consideration Amount on the Settlement Date, CMSCI would then issue the Note to CMB. The term "the Holder" was defined in the Note as CMB. The Note as issued was already signed by CMSCI. The Note would be then signed by CMB, as the Holder and the signed copy would be returned to CMSCI. Once that had occurred, albeit as a separate process some weeks after the trade date, a copy of the Note would be sent by fax to the customer.

viii) I am satisfied that, although it has not been possible for Chase to locate all the Springwell folders to establish a full documentary record of its transactions, largely because of the passage of time and various relocations, the evidence clearly establishes that the general process for signing and sending out the GKO-linked Note documentation was applied in Springwell's case. My conclusion is based not merely on the transaction documents that do exist in relation to Springwell but also on the fact that Chase retained spreadsheets for tracking both the returned confirms, and the sending out of copy Notes, and had a process for the chasing up of signatures. Further, shortly after JDM took over in early May 1998, the team re-faxed all outstanding documents and pressed for completion of the various formalities. After the Russian default, an audit was done of the documentary process and the conclusion was that it was largely complete. Indeed, JDM's spreadsheet sent in early September recorded that Springwell had only one outstanding unsigned trade confirm.

ix) Thus I conclude that copies of the GKO-Linked Notes were faxed, probably directly to Springwell in Piraeus (or possibly to its London office), and that the confirms and Terms and Conditions sheets and risk disclosure sheets were also faxed to Springwell, and in many, if not all, cases signed and returned to Chase. Indeed, AP admitted in evidence that he had signed at least two Terms and Conditions sheets, and risk disclosure statements sheets, in the name of JBAX, despite the fact that Springwell's pleaded case, supported by AP's statement of truth, stated that they had been signed by JBAX.^[91]

Restructured debt of the former Soviet Union: Prins and IANs

327. Shortly after the break-up of the Soviet Union, its foreign commercial and sovereign debt went into default as the issuer of record (i.e. the Soviet Union) had ceased to exist. There were prolonged negotiations between the Russian government and a committee of the commercial creditors of former Soviet entities (called the London Club) aimed at the restructuring of these obligations, during which the Russian government agreed to accept all Soviet liabilities, in return for ownership of all Soviet assets. During the course of these negotiations, several types of defaulted debt were actively traded, including defaulted obligations of Vneshekonombank ("Vnesh"), the Soviet Union's state-owned foreign payments agent. Agreement on the restructuring of the Vnesh bank debt was reached in 1996, which led to the defaulted loans being converted into "Prins" and "Interest Arrears Notes" or "IANs", which were issued in December 1997. As the names suggest, Prins were restructured principal obligations and IANs were restructured interest obligations. From about June 1996, Prins and IANs had been traded on a when/if ("w/i") basis side-by-side with the original Vnesh bank loans. These w/i obligations appear to have been traded quite heavily in the market, especially in the months approaching December 1997.
328. There were a number of differences between Prins and IANs. Prins were loans maturing in 2020. They had a settlement period of 10 days and paid interest partly in cash and partly in IANs. Accrued interest was included in their price until it was paid, at which point Prins traded at an ex-dividend price. IANs were bonds maturing in 2015. They were cleared by the Euroclear system and settled in three days.
329. In late 1997 and throughout the first eight months of 1998, Springwell bought significant holdings in Prins and IANs. Initially, from December 1997 to March 1998, it bought and sold IANs through Chase and Prins through Merrill Lynch, as well as several other sovereign bonds such as Brazil C-Bonds or Russian eurobonds, taking advantage of volatile markets to make good profits.
330. Subsequently, from late April 1998, Springwell began to build up a substantial position in Prins, buying incrementally and frequently against the background of a falling market. The evidence showed that Springwell's strategy was to average down: to acquire Prins at ever-cheaper prices in the anticipation that there would be a substantial market rally, which would allow it to sell its Prins at a considerable profit.
331. In June and July 1998, there were opportunities to take profits on some of Springwell's Prins when the market temporarily moved upwards. However, AP was reluctant to sell, and did not do so because prices had not appreciated to the levels at which he wanted to sell. Instead, Springwell continued to buy Prins into late July and August 1998 as prices fell very low, such that its last two purchases of Prins in August 1998 were at 29¾ and 29 respectively. By 17 August 1998, Springwell held Prins and IANs with a total purchase cost of $ 87,050,000.
332. The Prins and IANs were serviced until the August 1998 crisis. After a period of default, a second restructuring was carried out leading to the granting of an approximately 35% "haircut" (i.e. reduction in NPV of the bonds): Russia issued an 8¼% sovereign bond and a "step-up" sovereign bond in exchange for the defaulted Prins and IANs. These bonds have been fully serviced since their issue.

New Russian dollar-denominated debt instruments – sovereign debt

333. In November 1996, reflecting the generally positive mood about Russia among investors, Russia came to the international capital markets for the first time since the collapse of the communist regime. I accept JA's evidence that this was a major development in emerging markets business. Its first sovereign Eurobond, issued in November 1996, was for $ 1 billion, with a yield of 9.25% and a maturity date of November 2001 ("Russia 9.25% 2001"). Its yield was only slightly higher than similar types of Brazilian sovereign Eurobonds trading at 8.92% or Mexican bonds trading at 8.710% on the same day. While the market value of these bonds fell dramatically in the aftermath of the Russian crisis of 17 August 1998 by almost 75 %, they never defaulted and were paid in full at maturity in 2001. Half a dozen or so other sovereign Russian Eurobonds were subsequently also issued, either as part of restructurings or to raise further capital. Likewise, although prices of these bonds also fell in the aftermath of the Russian default, they recovered steadily thereafter and none of them defaulted.
334. Springwell's first purchase of Russia 9.25% 2001 was on 21 November 1996, when it purchased $ 1.5 million principal amount on the date of issue at a price of 99.561%. Thereafter, Springwell made repeated purchases of that bond and two other Russian sovereign Eurobonds, Russia 10% 2007 and Russia 11.75% 2003 as set out in detail in Appendix 8 of Chase's closing submissions. Springwell's last purchase of a sovereign Russian Eurobond was the purchase of $ 5 million Russia 11.75% 2003 at a price of 55.25% on 11 August 1998, a week before the Russian default. Springwell made several purchases and sales of these sovereign Eurobonds at a profit, which do not feature in the claim portfolio.
335. Springwell claims against Chase for the sum of $ 21,096,875 in respect of Russia 10% 2007 bonds (RU4) in its portfolio at the date of default, based on the valuation of those bonds as at 14 January 1999. A graph of bond prices for Russia 10% 2007 shows that the price recovered dramatically after that date. In fact, Springwell maintained its holding in these bonds after 14 January 1999 and the evidence showed that, in relation to them, Springwell made a net profit (after costs of financing) of $ 13,390,404.

New Russian dollar-denominated debt instruments – sub-sovereign and corporate bonds

336. Numerous Russian regions, municipalities and banks and corporate issuers took advantage of market conditions in 1997 to issue corporate bonds or notes Springwell's first purchase (RU2: City of Moscow) was on 27 May 1997. By 17 August 1998, Springwell held Russian corporate bonds or notes with a total purchase cost of $ 81,726,870.
337. These included the following bank bonds, which are the subject of Springwell's claim, and which were issued respectively by Unexim, VTB and Rossiyskiy Kredit Bank. These were Russian banks which, according to a detailed assessment published by Chase on 30 May 1997 "Overview of the Russian Banking System" listed them amongst the top 20 largest Russian banks by assets. However they all defaulted on their bonds in the wake of the financial crisis in 1998. The relevant bonds were:

i) Unexim Eurobonds purchased by Springwell on 17 July 1997, 22 October 1997, 10 November 1997 and 28 May 1998;

ii) VTB FRN bonds purchased by Springwell on 12 September 1997, 20 November 1997 and 10 March 1998; and

iii) Rossiyskiy Kredit Eurobonds purchased by Springwell on 17 September 1997, 22 October 1997 and 27 March 1998.

338. Springwell also made the following purchases of other Russian bonds and former Soviet Union investments:

i) after AP's trip to Moscow in May 1997, Springwell made a single purchase of a City of Moscow Eurobond in the sum of $ 5 million at par on 27 May 1997 for value date 6 June 1997;

ii) Springwell made purchases of a bond issued by Tatneft, one of Russia's largest oil companies, on 2 October 1997, 22 October 1997, 31 October 1997, 24 March 1998 and 28 May 1998;

iii) Springwell purchased a $ 5 million Kazakhstan bond on 29 December 1997.

iv) Springwell purchased a $ 5 million VW RUR note, in 2 tranches, on 21 May 1998 ($ 2 million) and 28 May 1998 ($ 3 million).

v) Springwell spent $ 5 million on a 1 year republic of Ukraine Federation Loan through a Chase structure.

Springwell's Indonesian investments and the Asian crisis

339. Springwell also complains about three Indonesian investments bought by Springwell on 22 October 1997, specifically:^[92]

i) $ 10 million face value Indah Kiat 10% '07;

ii) $ 5 million face value Polytama 11.25% '07;

iii) $ 5 million face value Tjiwi Kimia 10% '04.

Indah Kiat and Tjiwi Kimia were subsidiaries of the APP Group, an Asian pulp and paper conglomerate which was the largest producer of paper and pulp in Indonesia. Polytama was a polypropylene producer.

340. Although Springwell's case against Chase is concerned with investments it bought in October 1997, Springwell's purchases of Indonesian assets had, in fact, began at a much earlier stage of its relationship with Chase. Thus:

i) on 1 March 1993, Springwell had bought $ 4 million face value Sampoerna 9% '96 at 99.63. This bond subsequently matured at face value on 12 March 1996.

ii) On 30 November 1993, Springwell had bought $ 7 million face value Semen Cibinong 9% '98 at 99.84. Semen Cibinong was an Indonesian cement manufacturer.

Moreover, Springwell had bought another Indonesian bond in March 1996, $ 5 million face value Indah Kiat 8.875% '00 at 96.88. It sold this holding on 18 October 1996 at 98.25.

341. Springwell's October 1997 Indonesian investments were made against the backdrop of what has become known as the Asian crisis, which primarily affected domestic currencies and financial markets, initially in Thailand and subsequently in other Asian countries, including Indonesia, Malaysia, the Philippines, Hong Kong and Japan. On 2 July 1997, Thailand allowed the baht to fall, provoking a burst of selling in the currency markets which spread quickly to Indonesia, the Philippines and Malaysia. AP was aware of this, and the resulting volatility in Asian markets, as he accepted in cross-examination. He discussed it with JA on 16 July 1997, when he agreed with JA that he knew what had happened with the Asian currencies, saying "it started with Thailand and then it went to Indonesia". He went on to ask JA if he sensed any "trouble ahead", saying that "we want a little bit of trouble" because Springwell had liquidity of $ 200 million. I accept that, right from the start of the Asian crisis, AP was anticipating market trouble which would provide him with an opportunity to spend Springwell's considerable liquidity at low prices. AP was evasive about this when asked about it in cross-examination, but he appeared to accept that he had a strategy with JA to "look at opportunities", observing that "I always wanted to buy something at – when the prices are low".

The Global Investor Service Account Agreement

342. On 14 March 1997 Springwell opened a custody account with CMB, whereby CMB provided custodian services to Springwell, in relation to securities purchased by Springwell as part of the Margin Forward Programme. The terms were set out in a Global Investor Service Account Agreement, in which Springwell acknowledged that

"the account is not managed or advised by Chase and that all decisions with respect to investments will be made by [Springwell]".

The document appears to have been signed by JBAX and another on behalf of Springwell, although no evidence was given as to the circumstances in which it came to be signed. It was not pleaded by Chase, was not relied upon by Chase in its oral opening, was not cross-examined upon or referred to during the trial and was not relied upon in the Agreed List of Issues. On that basis, Springwell submits that the document should be disregarded. However, although I am prepared to do so for that reason, it has nonetheless to be noted that its terms are entirely consistent with the terms of all the other Chase documentation which purport to negate the existence of any investment advisory or management responsibility on the part of Chase.

The repo programme and the GMRA

343. In about September 1997, a year after the merger between Chase and Chemical Bank, the emerging markets leverage programme was changed from a Margin Forward Programme to a repurchase ("repo") programme under the terms of which CMB agreed to provide, by means of purchase and repurchase contracts between it and the customer, the financing arrangements for the securities which the customer was purchasing from CMIL. Thus if, for example, Springwell wanted to make leveraged purchases, it would agree to purchase the relevant security from CMIL and, pursuant to the GMRA, then immediately sell it to CMB under a repo contract pursuant to which Springwell was obliged to buy it back from CMB at a future date. The underlying purchase of the bond from CMIL (or other Chase entity) was a separate transaction from the repo contract, albeit related in the sense that the agreement to purchase the underlying security might specifically (as with the GKO-linked Notes) refer to the repo arrangements. This made it necessary for all clients to sign a Global Master Repurchase Agreement ("GMRA"). The transition to the GMRA standard form applied to all clients and occurred in October 1997. All new leveraged transactions after 3 October 1997 were carried out under GMRAs rather than under the previous Margin Forward Programme. As part of the transition, all outstanding transactions which were previously leveraged under the MFAs were rebooked as transactions under the GMRAs. The GMRA was a standard form market document issued by the Public Securities Association in New York, although subject to English law and jurisdiction. The GMRA between Springwell and CMB was signed, in the circumstances set out below, by JBAX on behalf Springwell and by FS on behalf of CMB and was dated 22 September 1997.
344. By clause 9 thereof, each party to the GMRA represented and warranted that:

"(g) in connection with this Agreement and each Transaction [as defined]:

(i) unless there was a written agreement to the contrary, it was not relying on any advice (whether written or oral) from the other party, other then the representations expressly set out in this Agreement;

(ii) it has made and will make its own decisions regarding the entering into of any Transaction, based on its own judgment and upon advice from such professional advisors as it had deemed it necessary to consult;

(iii) it understands the terms, conditions and risks of each Transaction and is willing to assume (financially and otherwise) those risks."

345. Further, by clause 24, Springwell represented that, as at the date of the GMRA, and as at the date of each transaction under the GMRA (defined as a "Transaction":

"(a) it is a sophisticated investor; (b) in the normal course of business it enters into transactions similar to Transactions; (c) it had access to such information concerning such Transactions and Securities [i.e. the securities purchased] as it had requested; (d) that it is familiar with and was able to evaluate the merits and risks associated with Transactions and Securities, including the risks of entering into Transactions involving Securities denominated in foreign currencies, and that it had the financial resources to absorb the risk of any loss that might be associated with Transaction and Securities".

346. By clause 25, it was agreed that:

"Each Transaction shall be deemed to have been entered into by each party in reliance only upon its own judgment. Neither party shall have any responsibility or liability whatsoever in respect of any advice given as to whether or not the other party should enter into any Transaction (whether as Buyer or Seller), or as to any subsequent actions relating thereto or on any other commercial matters concerned with any Transaction or in respect of views expressed by it or any of its officers, employees or agents, whether or not such advice was given or views were expressed at the request of the other party."

347. Confirms under the GMRA, which were faxed to Springwell in respect of each transaction, were in a shorter form than those under the MFA. However, they were also signed and returned by Springwell. They provided that:

"This confirmation supplements and forms part of and is subject to the [GMRA] as entered into between us as of 09/23/1997 as the same may be amended from time to time (the Agreement). All provisions contained in the Agreement govern this confirmation except as expressly modified below".

348. The 1997 DDCS Letter was in substantially the same terms as the 1993 DDCS Letter and was signed by JBAX on behalf of Springwell, and signed by FS on behalf of CMB, and by other Chase employees on behalf of CIBL (under the name Chase Manhattan Plc) and CMIL. Again, it resulted from the reorganisation following the merger of Chase and Chemical Bank in 1996 and the imminent transfer of business from CIBL to CMIL at that time.
349. My findings as to the circumstances surrounding the signing of the GMRA and the 1997 DDCS Letter are as follows.
350. They were signed together in Greece. They were brought there by FS and JA, who had travelled to Greece because they needed to meet with a number of Hellenic Group customers as part of the transition to the repo programme and obtain their signatures to the new documentation.
351. The transcripts show that, prior to the meeting in Greece, JA had discussed the commercial terms of the GMRA with AP on several occasions on the telephone, and had told AP that the reason for signing it was that Chase was changing from the Margin Forward programme to a Repo programme; one transcript also shows that AP mentioned that he had already signed up to a GMRA with ML. The evidence, which was not really in dispute on this point, was that JA said that the GMRA was an industry standard document, that Chase was moving from the MFA Programme to the Repo Programme and that there was no substantive difference for Springwell in the commercial effect of the new arrangements, save that the GMRA would ultimately be better for Springwell because of the possibility of cheaper financing. It was common ground that the GMRA Relevant Provisions were not pointed out to AP or explained to him, either in the course of these conversations or subsequently.
352. There appears to have been no discussion of the terms of the 1997 DDCS Letter with AP before it was signed. Neither AP nor FS had any recollection of any such discussion, although FS maintained in cross-examination that he would have said that the Letter was a re-issue of a letter previously signed and the need for it arose because of the Chemical merger. Certainly nothing was said to AP about the presence or effect of the Relevant Provisions. AP did not see a copy of the 1997 DDCS Letter until the start of the US Proceedings. As with the 1993 DDCS Letter, he maintained in his witness statement that, if he had had its provisions pointed out to him, he would not have signed the 1997 DDCS Letter. For similar reasons as those set out above in relation to the earlier letter, I reject his evidence that he would not have signed the 1993 DDCS Letter, if he had appreciated that it contained charges over Springwell's assets and the Relevant Provisions relating to advice, non–reliance, treatment as a Non-Private Customer and sophistication.
353. JA had arranged with AP to meet him and SP at 11.30 am in Piraeus on the Monday morning, and AP and JA had lunch together that day. It was FS who actually took the GMRA and DDCS letter round to the Polembros offices in Piraeus that day, after office hours. FS gave the GMRA and the DDCS letter to SP, who, as he accepted in evidence, had the opportunity of reading them, but did not do so. AP had already told SP that the documents would be brought to the office by FS and that AP had given his approval for them to be signed, so FS did not think that SP was expecting an explanation. Because SP was relying on the fact that AP had told him that the documentation FS was bringing round could be signed, SP assumed that "everything which needed to be discussed…had been discussed" between AP and FS, and, on that basis, accepted that he was not looking FS for an explanation of the documents and did not criticise him for not giving one. After about 20 minutes of pleasantries, during which FS explained that the documents were those which AP had forewarned SP that FS would bringing round, SP called JBAX into the room to sign the documents. JBAX did so, without reading them, and left the room. It was common ground that no explanation of the documents was given by FS to JBAX.

Springwell's case in respect of the period 1994 – 1998

354. I have set out the chronology in some detail, as it is the necessary context in which to consider Springwell's case, as developed in argument and in evidence at trial. The principal focus of its argument was that, whatever the position in the early years, by 1996, and through to 1998, as Springwell's portfolio grew larger and larger, increasingly concentrated in Russia, and leveraged, (a) CMB, the Private Bank, whether acting by its own staff and/or (Springwell's primary original case) through JA, and, or alternatively, (b) CIBL, and then CIML, acting by JA, were, or came, under a free-standing duty of care, at the least to warn Springwell of the risks inherent in the Russian concentration in its portfolio, and to advise it to diversify its emerging markets portfolio, either by investing in different countries within the emerging markets sector, or by diversifying out of emerging markets into other sectors and assets. Springwell also maintained its wider argument that the Private Bank and, or, alternatively, CIBL, and then CIML, at all times remained under a duty to provide general investment advice in the wide terms pleaded in the RADC.
355. Logically I find it appropriate first to consider the actual conduct of, or role played by, JA over this period. His conduct or role, as I state above, is one of the factors to be taken into account in determining whether Chase owed a duty of care to Springwell to provide investment advice. Thus, any determination as to whether the Private Bank, or CIBL/CMIL, whether because of what JA was doing, or irrespective of what he was doing, assumed a responsibility generally, or specifically, to advise Springwell has to be seen in the context of what JA was doing in practice. It is to this first topic, which I next turn.

The conduct or role of JA in the period 1990-1998

356. Mr. Brindle's submission was that Chase (through the activities of JA) held itself out as advising and willing to advise on an on-going basis both on particular investments and on the general composition of Springwell's portfolio as a whole. He submitted that it was not really necessary to distinguish between the roles of the different Chase corporate entities because AP simply looked to "Chase". He relied, in particular, on the evidence of discussions between JA and AP, as contained in transcripts of their, often very lengthy, telephone conversations during the period from May 1997, as well as on JA's and AP's own evidence. He also relied on evidence from others within Chase, as well as the expert evidence, to support Springwell's primary case, that Chase had an obligation to advise Springwell in the wide terms pleaded in the RADC or advanced in argument. He contended that, because (as he submitted) Springwell could not be categorised as "an execution-only customer" for the purposes of Appendix 42 to the SFA Rules, the necessary corollary was that Chase had an advisory relationship with Springwell.
357. It was common ground that JA was a salesman of debt securities, who was employed by CIBL, and then by CMIL, to buy investments from and sell investments to Chase's customers, and that he was not employed by Chase as an investment advisor.^[93] It was also common ground JA sourced and presented investment opportunities to AP and that, over the course of the 1990s, JA and AP established a strong and close relationship. As part of that relationship, they talked frequently on the telephone, often at length, not only when JA had something to sell, or AP wanted to buy, but also when earlier investments where close to maturing, and AP wanted to know what was available or when AP wanted advice as to what to do. As AP himself said, they used informal language and the tone of their discussions was extremely informal. There were no agenda for the conversations which were, for the most part, unstructured.
358. Mr. Hapgood accepted that JA made recommendations to AP about the market and about particular securities and that AP plainly valued his opinion and asked for it frequently; he accepted that, given their long relationship, it was not necessary on each occasion for AP formally to request JA's opinion on a particular transaction; he further accepted that the provision of information and the giving of opinions came to be expected by AP, and that JA would often give personal opinions and make recommendations accordingly. But, he submitted, none of that was inconsistent with JA's role as salesman: salesmen frequently express their views and make recommendations; they do not thereby, and without more, assume advisory duties of care in respect of their opinions, let alone a more general positive duty to give advice. He further submitted that, equally, none of this did make, or could reasonably have made, AP think that JA was anything other than a salesman.
359. Having reviewed the numerous transcripts of the conversations between AP and JA from May 1997 onwards, I conclude that they show the following aspects of the role played by JA:

i) At times JA stated to AP – but in a very loose and general sense - that he was "managing" Springwell's emerging markets portfolio together with AP and that he was spending a considerable amount of his time in sourcing appropriate emerging markets investments for Springwell to buy. But this general, layman's use of the word "manage" would not, I find, have in any way have caused AP to conclude that Springwell had some sort of investment advisory agreement with Chase, whereby the latter had agreed to manage the emerging markets portfolio; or that JA was in fact doing so.

ii) At times JA held himself out to AP as selecting and assessing from the field of potential emerging markets investments only investments which he, JA, thought were appropriate for Springwell.

iii) At times JA advised or recommended AP to buy or to sell, or to continue to hold, specific emerging markets investments. I should emphasize that I use the words "advise" and "recommend" indiscriminately and regard, in the context of the issues which I have to decide, as synonymous.

iv) At times, but in very general terms, JA advised on the shape of the emerging markets portfolio as a whole or on parts of the portfolio; he also advised, but likewise in general terms, on appropriate country weightings within the portfolio, not merely, as JA himself accepted, in cross-examination, from Chase's own credit perspective, and also, again in general terms, suggested an investment strategy for Springwell's emerging markets portfolio.

v) At times JA and AP together reviewed the emerging markets portfolio as a whole, or parts of it, in order to monitor performance, to improve credit quality or formulate future investment proposals. These conversations were aptly described by Mr. Hapgood as "long general investment review conversations", but they were, as I accept, of a very generalised nature.

vi) Sometimes, but not invariably, JA gave advice as to what AP should do as regards investment proposals from Merrill Lynch in relation to emerging markets investments. In some cases, JA advised AP to buy from Merrill Lynch, in some cases he advised AP not to buy from Merrill Lynch and in other cases he advised JA to sell assets he held at Merrill Lynch. From time to time, JA also, but superficially, commented on the composition and performance of the emerging markets portfolio which Springwell had at Merrill Lynch and provided updates on the pricing of assets Springwell held there.

vii) At times AP specifically left it to JA to decide what to do in relation to a particular emerging markets investment. On other occasions, JA, off his own back, exercised his discretion in relation to a decision that had to be taken in relation to the portfolio. For example, there were three transcripts which showed that JA appeared to have taken a unilateral decision that Springwell should bid in primary issue auctions being run by Chase; there were occasions where JA appears to have taken the decision to roll-over an investment, if, for example, AP was on holiday; and there was an example where JA chose the hedge provider for a GKO-linked Note.

viii) At times JA held himself out as seeking for Springwell a beneficial price or a beneficial rate (at the expense of the Chase traders) or as being concerned for and acting to protect and further Springwell's interests (again potentially at the expense of the Chase traders).

360. The following passage from the cross-examination of JA gives a good flavour of how he operated in practice:

"Q. You mention the portfolio. Can you just clarify this with me? To what extent -- and let's just deal with this time that we are at, in 1994, at the moment -- did you see it as part of your responsibility to have a hand in the shape of the portfolio, what the portfolio contained, what its overall structure and content was, as opposed to individual investments? Do you see what I mean?

A. In terms of the emerging markets portfolio?

Q. Yes.

A. I was -- you know, I was a key constituent for the shape of their emerging markets portfolio.

Q. So it was part of your role, as you understood it -- let's put "advice" out of the way for the moment; I'm not getting into that again -- to help to shape the portfolio?

A. Yes.

Q. To shape it according to what? According to what was suitable for them or according to what they wanted or what?

A. Well, I think the diversification argument within -- you know, cross-country between the corporate opportunities that existed as well as the sovereign opportunities that existed globally; not simply within, you know, the context of, let's say, Latin America in isolation. And also -- so that was really the key. So within the context of their emerging markets portfolio, I was looking to give them the diversification and obviously to -- you know, there were attempts to keep within, you know, guidelines in terms of concentration and issues such as that.

Q. Would it be fair to say this was not solely a matter of keeping the credit department happy, it was also what was in the interests of the client or what was good for the client?

A. I always had what was good for the client in my mind whenever I sold or bought anything from them.

Q. Thank you. Could you look at page 106 please? There is just a fairly short passage, another conversation between you and Mr. Sheehan. After initial pleasantries just below the second hole you say: "I have been sort of charging around, I have been spending an inordinate amount of time with Polemis and, you know, on him, just switching him out of the whole portfolio. There were basically four positions that we didn't like and, you know, he's -- he's got to be a brave boy to get out of and he's -- we've done two of them and re-invested them very well, and I'm just working on the other two and, you know, just so -- he doesn't like it, but I mean cos I'm focusing exclusively on the four things, on the two things that are a problem, but, I mean I'm just thinking I -- you've got to concentrate on Adam to get, you know, to get to deal with it now. There's no point ignoring it. The rest of it is in very good shape ...", et cetera. That is an illustration, I suggest, of your concern for the overall shape of the portfolio --

A. Yes.

Q. -- as you have just illustrated in your more general answer.

A. Yes.

Q. This is an example of what you were just saying?

A. I would say so, yes."

(My emphasis supplied.)

361. Certain of JA's superiors also gave evidence to the effect that the making of recommendations, the expressing of opinions, and, indeed, the giving of advice, were part and parcel of the every day life of a salesman in emerging markets. Thus KOD, who set up and ran IFI from 1987 and was an articulate and impressive witness, gave the following evidence about the role of a salesman:

"Q. Now, looking at Mr. Atkinson's general role as you understood it vis a vis Springwell, he certainly was not an execution-only salesman, was he?

A. No, all of the salesmen in the emerging markets group were value added type of salesmen because of the nature of the market. It was a more complex market, a riskier market, and our salesmen were developed and educated so that they could deliver value added to the client to help them make proper decisions for themselves.

Q. That 'value added' -- that is your phrase -- that could include advice to the client?

A. We did not really want people to be coming up with their own independent advice in a vacuum of -- or out of the realm of what was really going on with the fundamentals of the country. So we made a very big effort to educate our sales force through our research department about the underlying fundamentals. They would have sales meetings every day, so that in the morning, when they walked in, they were updated about the ebbs and flows of the market, not just the fundamentals, but what sort of pricing dynamics were driving it, what new issues were coming in or out, so that we would have informed salespeople. So that the value added was something that we were channelling as opposed to anyone independently coming up with their own ideas and we did not know what people were saying all around the world. We really wanted to channel people's conversations in a way that we thought reflected the information that we were giving them. Then of course they would digest that and come up with their own ideas about what would make sense for their particular client. But the information that he would have been getting would have been the same information that all of our salespeople would be getting.

Q. You would expect him, following on from your answer, then to communicate with the customer and, if appropriate, to make recommendations to the customer about what was suitable?

A. What would be most suitable considering what their objectives were. Each salesman had a different customer profile that they were dealing with and they would take it from there, so to speak.

Q. There is nothing wrong with calling that 'investment advice' is there?

A. No."

"Q. Did you get the impression at this early stage that he was relying on the recommendations that Mr. Atkinson made to him about individual investments, at least as part of the picture?

A. I think that all of the investors, when they came to the emerging markets as new entrants, to a greater or lesser extent are relying on the advice that is given to them by the people that are introducing the investments ... ."

MF, SG and Paul Charman ("PC") (Chase IFI London, Head of Emerging Markets Group 1992-1996) gave evidence to similar effect.

362. On the other hand, Jorge Jasson ("JJ") (who was based in New York where he was Head of Emerging Markets Business between 1993 and 1994; Head of IFI in 1994 to 1995 and 1997; Co-head/Head of Emerging Markets business from 1996 to 1997; Head of IFI from 1997 to 2003; and Member of Chase's Senior Committee), another impressive witness, with many years experience in the field, looked at the matter more restrictively and was reluctant to accept that JA would have been giving advice as such. Whilst he accepted that a salesman might provide market information and price information and make recommendations, and otherwise provide a "value-added" service to sophisticated clients, who would then exercise their own judgment in deciding whether to transact, he was reluctant to accept that such recommendations amounted to "investment advice". He emphasized the substantive distinction between the role of a salesman and the role of an advisor. He stated that, within his department (i.e. IFI) in Chase, no investment advisory service was in fact provided. He said:

"We were not in the advisory business, we were not being paid for advice and I did not want any of my people to be seen as investment advisors because they were not." ^[94]

363. He was confident that no-one in his department performed such a role. He explained that the department was simply not tooled up to do so, and, according to him, did not do so, because it was a trading business. He stated that an investment advisory service was not offered, and could not be offered, by a salesman reading off a screen; an investment advisory service was an entirely different sort of service, more profound, and extensive and directed to a different goal. He explained the difference as follows:

"Q. Finally, the last line 14 on page 98, I asked: 'There is nothing wrong with calling that "investment advice", is there?' And she [KOD]said: 'No.'

Do you agree?

A. I've already said 'yes, I think it is wrong' five times today. I would not call it 'investment advice'. I think the context -- I would have to repeat a lot of the things that I said. I don't think that is very complete as an answer to say that that is investment advice.

Q. What is wrong with calling it 'investment advice'?

A. I think that 'investment advice' goes far beyond that. Our salespeople did not do that. If you talk to people who give investment advice, if you talk to people in the asset management business, if you talk to people who actually do that for a living, you see that the product that they put on the table is much more comprehensive, much more research-driven than what is requested of people who are actually trading and who are actually dealing with markets in a volatile environment that requires that they make decisions based on prices on screens many times a day." ^[95]

364. Mr. Dicker, Springwell's private banking expert, said that he could not disagree with this passage.^[96]
365. In support of his argument that, because Springwell could not be categorised as an execution-only customer for the purposes of "Guidance Notes on Execution-Only Business"^[97] as contained in Appendix 42 to the SFA Rules, it necessarily followed that Chase owed advisory duties to Springwell, Mr. Brindle explored at some length with the Chase witnesses, and the experts, the meaning which individuals gave to the term "execution-only", and whether, in their view, JA's role fell within that description.
366. The relevant notes in Appendix 42 provide as follows:

"Guidance Notes on Execution-Only Business

Background

1. There is no separate category of execution-only customer in the SFA rulebook. A firm should categorise each customer as either a private or a non-private customer. The rule obligations owed to a customer will depend on the nature of the investment services provided to him.

2. A customer who receives a dealing-only service is nonetheless commonly referred to as an 'execution-only customer'.

Application of CoB rules to execution-only dealing arrangements

3. Where a firm solely provides a dealing-only arrangement to a customer, it will not provide personal recommendations to him and will, therefore, not be required to comply with advisory obligations relating to the duties to 'know your customer', give suitable advice, disclose material interests, and provide risk warnings (except in respect of derivatives and warrants).

3A. An execution-only transaction effected or arranged by a firm is one where the customer specifies the exact investment in which he wishes to deal. In order to be able to do so, the customer must know of the investment before approaching the firm. This is evidently the case, for example, when a customer places an order for a specific equity. However, in the case of a derivative, before being able to describe a transaction as execution-only, a firm must be able to demonstrate that the specific investment was chosen by the customer. Where standardised products exist, such as exchange contracts, or contracts which match those dealt in on an exchange, the question to be addressed is whether or not the customer chose that product himself or had it suggested to him in response to a request to achieve a particular end. On the other hand, in respect of an OTC derivative, it is unlikely that a firm will be able to effect or arrange a transaction without either it or another person having given advice to the customer. Where a firm specifies the size of a contract which it is prepared to effect or arrange, this may not, of itself, prevent a transaction from being execution-only.

4. If a firm, at any stage, gives a personal recommendation to a customer, all these obligations [i.e. those rule obligations referred to in 3] will be owed, regardless to the customer's categorisation by the firm as 'execution-only'. Where a firm makes a personal recommendation, it must seek sufficient information from the private customer to satisfy the 'know your customer' requirement in Principle 4, ensure that any recommendation made is suitable for the customer, and ensure that any risks associated with the proposed transactions are disclosed. The precise application of the rules will, of course, also depend on the categorisation of the customer as private or non-private.

5. The rules applying to a dealing-only arrangement are-

…

Potential problems

6. Problems often arise where the investment services provided by a firm consist of more than a pure execution-only dealing service; for example, where the firm provides investment advice to its execution-only customers in the form of research recommendations, market commentary or investment analysis.

7. A firm may also send notifications to customers in respect of accepting dividends and other rights (particularly where execution-only customers' stock is held in the firm's nominee), or for exercising conversion rights and options.

8. Although the provision of these investment services would not automatically lead to a firm making a personal recommendation to a customer, a firm should ensure that information is presented in such a way that the customer could not gain the impression that he is being recommended to take, or refrain from taking, a particular course of action. Further, a firm should carefully consider the issue to execution-only customers of research recommendations, market trends, investment analysis and commentary on the performance of selected companies.

9. A firm which provides information in investments or markets to execution-only customers may avoid the problems highlighted by only providing this extra service on request, with the customer having to apply specifically to receive the information. Arrangements like this would help the customer to understand that he is receiving the information as an 'add on' to his dealing-only relationship with the firm. If the documentation contains clear disclosures to the effect that the information does not amount to a personal recommendation, and that the customer should seek his own advice as to the suitability of any investment mentioned therein, he should be fully aware of the basis on which the service is being provided.

Advisory customer acting in execution-only capacity

10. Situations may arise where a customer who receives a full advisory service decides to make his own investment decisions, and in doing so perhaps declines the firm's recommendation.

11. In these circumstances, the firm should ensure that it advises the customer in accordance with its suitability obligation, even if it means advising the customer that his proposed course of action is unsuitable for him. If the customer then insists on dealing, the firm should explain that it will only accept the order on an execution-only basis.

12. To evidence this fact, the firm should make a brief record of the conversation and mark the order ticket in a suitable fashion.

Conclusion

13. SFA does not wish to restrict the amount or type of informative documentation sent to execution-only customers by a firm. This information provides a useful service for customers and assists them in reaching their investment decisions. Firms are encouraged to provide as much helpful information as possible to all their customers. However, the basis on which the information is provided should be made clear.

14. A firm should ensure that any documentation issued to an execution-only customer contains a clear warning that the information is provided solely to enable the customer to make his own investment decisions." (emphasis added)

367. Notes 6 et seq (under the heading "Potential problems") show that an issue may arise as to whether an execution-only customer is being given personal recommendations, and therefore as to whether the firm owes him the relevant rule obligations, where an execution-only customer is given information about the markets or about investments. As note 9 demonstrates, it is envisaged that, if it is made clear to an execution-only customer that he is receiving the extra information only as an add-on to his dealing only relationship, no rule obligations will arise.
368. Mr. Brindle sought to rely on the evidence of the Chase compliance officer, Mr. Lyall, who in evidence was surprised to hear that JA had accepted that he did not conduct himself on an execution-only basis, for the very reason that if the relationship was not execution-only, Mr. Lyall regarded it "as advisory". He also relied upon the fact that it was substantially common ground between the private banking experts, as set out in paragraph 19 of Mr. Dicker's report that:

"The distinction between an execution-only transaction and an advisory transaction is well-understood … An execution-only transaction is one where the client acts without the benefit of any recommendation or other advice from the selling bank; an advisory transaction is one where the client does act with the benefit of some such recommendation or other advice".

369. There were a variety of personal opinions expressed by the Chase witnesses as to the meaning of the expression "execution-only". Some considered that the service of a salesman, making recommendations as JA did, amounted to an "execution-only service". Others regarded execution as the job done by the back office, with the result that JA was not an execution only salesman, as he did more than execution, but that did not mean that he was an advisor. The variety of responses demonstrated that there was no consistent or universal view as to the appropriateness of those words as a description of a salesman's conduct. Thus, for example, although the Emerging Markets experts were agreed as to the role of a salesman, even they disagreed on the application of the phrase "execution-only". Mr. Ian McCall (Springwell's Emerging Markets expert) thought that, if a salesman gave recommendations, the transaction could not be execution only. On the other hand, Ms Alexandra McLeod-Wilson (Chase's Emerging Markets expert) was of the view that such transactions were execution only. The divergence of views may have reflected the "Potential problems" identified in the Notes, to which I have referred.
370. However, I agree with Mr. Hapgood that the semantic debate about whether JA's role should be defined as an "execution-only" for the purposes of the SFA Rules was ultimately of little utility. Nor did I find the views of the various Chase witnesses, or the experts, as to whether JA's role could or should be categorised as "execution-only", either for the purposes of the SFA Rules, or more widely, of any real assistance to the issue which I have to decide, namely whether Chase owed a common law duty of care to advise in the terms pleaded or advanced in argument. This is because I do not accept Mr. Brindle's argument that, if Springwell could not be categorised as an execution-only customer (because it was receiving personal recommendations from JA), it necessarily followed that Chase and Springwell owed advisory duties, with all the incidents of a fully-fledged common law duty of care.
371. The Guidance Notes on Execution-Only Business make it clear that there is no separate category of "execution-only customer" in the SFA rulebook. Instead, as Note 1 makes clear:

"A firm should categorise each customer as either a private or a non-private customer. The rule obligations owed to a customer will depend on the nature of the investment services provided to him".

The Notes go on to deal with the application of the conduct of business rules to an execution-only transaction. But the relevant classification for regulatory purposes, as stated in the Appendix, is between private and non-private customers. Execution-only can characterise a transaction, but not a relationship. The principal purpose of Appendix 42 was to enable a firm to avoid having certain rule-obligations to customers designated as private customers, in relation to dealings on an execution only basis. They also enabled a firm to avoid having certain, much more limited, rule-obligations to customers designated as non-private customers, in relation to dealings on an execution only basis.

372. Whilst the Appendix envisages a distinction between an "execution-only transaction" (in which there is no personal recommendation) and any other type of transaction, this is of very limited relevance to the issues in this case for the following reasons:

i) the purpose of this distinction is the technical point of regulatory classification mentioned above.

ii) The Appendix does not address the nature of any services which a bank may in fact provide to a customer in any given case; or the common law, or contractual, duties which a bank may owe to a customer in any given case.

iii) The Appendix does not say that, if a transaction is not an execution-only transaction, as defined, there must be an advisory relationship and a duty of care.

iv) Clearly, in some of his telephone conversations with AP, JA was, and I so find, on many occasions, giving personal recommendations about particular investments, and not merely providing "research recommendations, market commentary or investment analysis" as described in Note 6 (albeit that on other occasions the information he was providing could be said to fall within that limited description). But whether, given the terms of the financing and MFA confirms which referred to individual transactions as "execution-only", some or all of such transactions were nonetheless "execution-only" transactions within the sort of arrangements envisaged in Note 9, does not seem to me to be a useful issue to decide, since the only consequence would possibly be that some limited rule obligations applicable to non-private customers would have been avoided. The issue for my determination is not whether any particular transaction did or did not fit within a certain description given in Appendix 42 to a set of rules. The issue is whether there was a duty of care, given the terms of the confirmations, and the other contractual documentation.

373. My conclusion, as a matter of fact, and on the evidence restricted to the role discharged by JA in practice, without any regard to the terms of the contractual documentation, is that, JA, in his capacity as a salesman, did give investment advice, in the sense of personal recommendations to AP about what emerging markets investments Springwell should buy and sell, and, in a very generalised way, about the state of, and strategy for, its emerging markets portfolio. However I find that, at all times (save in relation to relatively few and unimportant instances, where, largely for practical reasons, a decision was taken by JA, e.g. to roll over a particular investment), AP retained control over the decision-making and all decisions as to whether to initiate trades were taken by him on Springwell's behalf.
374. But this factual conclusion as to what the evidence showed that JA was doing, namely giving advice, in the sense that I have described, tells us nothing about what, if any, obligations were in fact owed by Chase, whether by CMB (i.e. the Private Bank) or by CIBL/CIML, to Springwell arising out of the conduct of JA in relation to its emerging markets portfolio. Still less does it inform us as to the extent of any such duties of care as were owed. In order to decide whether the advice given gave rise to obligations that went beyond the normal recommendations or "advice", given in the daily interactions between an institution's sales force and a purchaser of its products, so as to import obligations of the type owed by a fully-fledged investment advisor, one needs to look at all aspects of the objective evidence of the relationship between the parties. For this reason, I found the use of the term "advisory relationship" ambiguous; one has to be clear whether the term simply refers to a situation where A gives advice to B in the context of a commercial relationship; or whether the term necessarily connotes the existence of an obligation on the part of the provider of the advice to take reasonable care and/or to give advice about certain matters. I have accordingly avoided expressing my conclusions by reference to the existence, or otherwise, of an "advisory relationship".
375. But before considering whether JA's conduct in practice gave rise to a duty of care, it is also necessary to see what the Private Bank (aside from any activity on JA's part) was doing in practice, and what AP, or a person in his position, might reasonably have thought was the role being discharged by the Private Bank during the period 1994-1998, after EM left Chase, and it to this topic that I now turn.

The role of the Private Bank: 1994-1998

376. It was common ground that from 1990, the Private Bank had "general responsibility for the relationship with Springwell" and that, because of this, it received a share of the revenue from the trading carried on by Springwell with JA. There was also not much dissension between the parties as to what was actually being done, or not being done, by the Private Bank during the period. The real issue between the parties was whether, as Chase contends, the Private Bank, during the relevant period, was simply engaging in the marketing of various products (funds and investments) to Springwell, trying at the same time also to ensure that its products matched the client's needs, but without ever undertaking a general advisory responsibility or obligation, or whether, as Springwell contends, the Private Bank (whether through JA or its own officers) was indeed advising, albeit (as Springwell contends) wholly inadequately, and had accepted an obligation to advise as to what securities Springwell's portfolio should be invested in; as to the diversification of Springwell's portfolio as a whole; and, in particular, as to the diversification of the emerging markets portfolio.
377. There was, as I have already said, no written agreement in place between Springwell and the Private Bank, CMB (or any of its affiliates) at any time at all. During the 1990s, various efforts were made by the Private Bank (wholly independent of JA's activities) to market other products to Springwell, mainly managed funds (i.e. funds managed on a discretionary basis by the Private Bank or one of its affiliates). In his oral evidence, AP said that he appreciated that this was marketing, and he accepted that, after EM left, he knew that no-one at the Private Bank (in particular, neither MF, FS or SG) was either discharging the role of supervising JA's activities or of advising Springwell. His case, as developed in his oral evidence, was that after EM's departure from the Private Bank, JA effectively "was left by himself", and was playing the most important role, including that of relationship manager and private banker, and "running almost everything". This, however, was difficult to reconcile with any separate advisory role being discharged through the Private Bank's own personnel. But Springwell's case, particularly as advanced by Mr. Brindle in argument, was to the effect that the Private Bank's officers saw themselves as owing a duty to advise Springwell in relation to its investments, including as to asset allocation and diversification, but wrongfully failed to discharge that duty. The tension between AP's evidence and the way in which the arguments as to the role of the Private Bank were presented, and the manner in which they varied over time, reflected a weakness in Springwell's case.
378. In support of Springwell's argument that the Private Bank's officers accepted that they had an obligation to advise Springwell, Mr. Brindle pointed to: (a) what the Private Bank was in fact doing; (b) what various of the Private Bank's officers thought was their responsibilities and roles; and (c) certain internal Chase documents which Springwell contended reflected the Private Bank's acceptance of an advisory relationship and its corresponding obligations.

Use of the term "advice" and "trusted financial advisor"

379. In relation to the period between September 1994 and 1996, when MF was Head of the Hellenic Group, Mr. Brindle relied strongly on certain evidence given in cross-examination by MF, GZ, KW and other witnesses as to the acceptance that "advice" was given by them, and also on three internal Chase documents dated 1994 and 1995 in which there was a reference to the term "trusted financial advisor". First, Springwell referred to a Private Bank internal newsletter, in which it was said that "the Private Bank's goal is to became trusted financial advisor in all of its markets". Second, Springwell referred to what it said was an important document, namely what appeared to be a standard internal review undertaken by RC for the quarter June 1994 of the "SL Polemis Group". In this document, the "Chase Strategy" was said to be "to maintain our position as trusted financial advisors to the Principals". One of the "Objectives" was stated to be:

"Maintain our lead position with this client by providing investment advice tailored to the Principal's requirements with the emphasis on high return investments in a well-diversified portfolio".

Under the heading "Action" in the box designated "Clear Need", RC had written "Investment Advice" and, separately, "hedge for long gold position". In the box designated "product", he had written "Various" and in the box designated "Action", he had written:

"Undertake an analysis of the group's entire investment portfolio with the principal. Mario Ferrazzi to meet with principal in September

Options under discussion."

Third, Springwell referred to a memorandum dated 2 October 1995 from GG to his superiors, in which he described Chase as the "trusted financial advisor" to Springwell.

380. The evidence showed that the term "trusted financial advisor" was an internal marketing term within the Private Bank that was in vogue for a short period in the mid-1990s, and was a slogan or buzzword for Chase's aspiration to be the lead bank for its major customers. Thus, RC explained that, as he understood it, the term was intended to encourage relationship managers to maintain close relations with their customers, and to understand their business as a whole; and, for the purpose of his review, RC was merely using back to senior management the slogan which had come from the senior management.
381. MF said the following in cross-examination in relation to the use of the term:

"Q. When you came in in September of that year, did you appreciate that or did you have any comment on whether or not it was the Private Bank's goal to become trusted financial advisor to the top tier clients in all its markets?

A. Well, I had absorbed this 'trusted financial advisor' buzzword previously.

Q. Previously, yes.

A. Yes, because it was applying through the bank. As I think I explained earlier, there was a feeling that we had not done a good enough job at identifying client needs and at matching these needs with products, and from there came all the stuff including John Cleese. So we were all more or less sensitive to these buzzwords.

Q. That is right. They may have been buzzwords, but the words presumably mean what they say and were understood to mean what they said. You are not suggesting that they had some particularly special meaning?

A. No."

In relation to RC's internal review document, he said the following in cross-examination:

"Q. Do you remember when you came in in September somebody telling you -- one of those names perhaps that we looked at a moment ago or anybody else telling you -- that you should or might meet with the principal for this purpose?

A. I don't remember specifically. What I do remember is that because I came from a dealing room market/capital markets/derivatives background, there was an expectation that I could have conversations with the clients about markets and market opportunities on a competent basis rather than just having to refer to a specialist. So quite regularly the way that I was introduced to the clients was, 'Our new boss comes from a market background. If you want to have a chat with him and discuss whatever is appropriate, that is his experience angle'.

Q. This was in connection with the client need for investment advice; would you agree?

A. Yes.

Q. So far as you know, when you came in, did you undertake an analysis of the group's entire investment portfolio? I am just reading the words from that top right-hand part of 'Action'.

A. You know, in a way it was reasonably simple. There was this chunk of emerging markets and IMA, some liquidity, if I remember and that was it. There was this gold --I think it was a relatively small transaction, 5 million to 10 million, and I'm quite sure that, because I remember the gold, an effort was made to identify all the components in the portfolio.

Q. Yes. Just taking you back now to the box at the top, 'Objectives', just read to yourself what is in that box, will you, kindly? (Pause)

A. Yes.

Q. When you came in in September, when you got your feet under the table, did you share that objective?

A. Yes".

382. GG, when cross-examined about his memorandum referred to the term "trusted financial advisor" as "merely a marketing term" in the sense of a term used internally within Chase to categorise one's customers.
383. Mr. Brindle also relied upon the evidence of GZ, of which the following is an example:

"Q. The Private Bank, of which you were part, but I appreciate where you stood, was trying to provide the best service it could to the client suitable to its needs. Do you agree?

A. Yes.

Q That would involve, where appropriate, providing investment advice, would it not?

A. Yes."

384. And as regards KW Mr. Brindle relied on paragraph 21 of the former's witness statement:

"If a Private Bank is to be effective it is essential that the Relationship Managers know what is happening with their clients so they can ensure that the investments are suitable and match the needs of the client"

385. Mr. Brindle referred (amongst many other aspects of the evidence) to the evidence of a meeting on 21 September 1994 between representatives of the Private Bank (Sean Casey, GZ, RC AND MF) and AP, to which I have already referred in an earlier section of this judgment. In the course of that meeting, Sean Casey recorded that:

"It was very difficult to get some type of investment objective from Adam. He had a very hard time differentiating between the risk parameters of emerging markets and the G-10 markets. GZ also noted that [AP] did not appear to be particularly focused and gave little investment guidance."

However, it is clear from the notes of the meeting that its purpose was to review Springwell's IMA portfolio of approximately US$ 32.2 million that was managed from New York by Sean Casey. It was in that context, and no other context, that the Private Bank was trying to ascertain Springwell's investment objectives. What was, or was not, said or done at that meeting provides no support in my judgment for the existence of a general and wide obligation to advise Springwell outside the parameters of the defined IMA relationship.

386. In his evidence, MF accepted that, during his time at the Private Bank he did not push AP to increase his investments in IMAs. When MF took over EM's role in September 1994, AP was expressing dissatisfaction with his IMAs in voluble terms. MF was cross-examined by Mr. Brindle in the following terms:

"Q. Let's look at the broader story of the IMAs. For better or worse, as you say, at the end of 1995 he liquidated his IMA investments, right, and no new IMA type investment was taken out at any time before you left.

I want to return to the question that I asked you earlier which you were not inclined to agree with, which is: it does not look as though you were yourself promoting, during your time, further investment in IMAs.

Whether he sold his 30 million or not is one thing, but it does not look like you were saying, "You need to have more IMAs or more of this kind of thing in your portfolio". Would that be fair?

A. With this client, who -- you know, the first meeting I had with him, the point was that he wanted to close the IMA; it looked like sailing against a wind to tell him to double it. In a number of other situations I was indeed trying to get new business in and to have clients that had had IMAs with us to increase them. The big one in particular was the Angelopoulos one, where George Zannos was working on it, and we worked very hard at that and helped the client in a number of situations to try and preserve liquidity and ...

Q. But if you had believed in the case of Springwell that further IMA type investment was something that was appropriate for them, you would have presumably made your views clear to Mr. Polemis directly or indirectly through others?

A. I might have been at fault here. I didn't feel that I built a strong relationship with Polemis and I found it too much of an uphill battle to tell him: reduce a little bit your risk perhaps in the volatile markets and expand this bit, which may be less fun, but will be more stable."

387. I should say, for the sake of completeness, that Springwell also relied on various other aspects of the evidence to support the existence of an advisory duty of care, including in particular:

i) an internal conversation between RC and FS in 1994 the midst of a minor crisis relating to a position Springwell had taken in gold, in which RC suggested that FS and JA should speak to AP and say that "they were not salesmen but were there to advise him to make sure that what he got into made sense"; and

ii) a schedule of Jersey custody accounts prepared in January 1996 by Mike Jury, a Private Bank officer in Jersey, where Springwell which included, amongst others, Springwell's custody account was maintained, together with the statement: "Investment advice given by Chase Investment Bank Limited";

iii) the evidence relating to the manner in which Chase had provided partial compensation to Hellenic Group Investors who had invested in bonds issued by a Mexican textile company called Grupo Synkro.

388. For evidential reasons which are not necessary to rehearse, I have concluded that the evidence relating to the first two items above (namely the particular internal discussion and the statement in the custody schedule) do not assist in establishing that the Private Bank or CIBL owed a duty of care to advise. However the evidence relating to Grupo Synkro is relevant to the issue of the existence of a duty of care and it is to this topic that I now turn.

Grupo Synkro

389. The salient facts in relation to Springwell's $5 million face value holding in bonds issued by a Mexican textile company called Grupo Synkro are of relevance because they show AP's experience and awareness of the risk in building up Springwell's portfolio of high-yielding emerging markets investments. They show that Springwell had experienced major volatility, event risk and corporate default by the end of 1995, nearly three years prior to the events of the Russian default. He also later had experience of the Indonesian crisis and the fall out from the Asian crisis. Despite this, AP's built up Springwell's portfolio of emerging markets assets through leveraged purchases and purchases of distressed emerging markets debt. This pattern continued through to August 1998, and indeed beyond the date of the Russian default.
390. The Grupo Synkro issue is also relevant because Springwell alleges (at paragraph 16(6) of its Reply) that:

"… it was clear to [AP] that consistent with his understanding of Springwell's relationship with Chase and [JA] in particular, Chase accepted responsibility for the investment advice which it had … given and was prepared to indemnify Springwell against losses arising from such advice."

391. Grupo Synkro was a Mexican textiles company which issued a $50 million bond in October 1992, due to mature in October 1995. The bond was held in the name of CIBL, with Chase Manhattan Trustees Ltd ("CMTL") as trustee. The evidence showed that Chase's Hellenic Group customers invested heavily in this bond. Springwell was one of the Hellenic Group who invested in Synkro, purchasing a $5 million face value holding on 6 April 1993 at a price of 95%. In early October 1995, Synkro advised bondholders that it would not be able to redeem the bond, though it appears to have remained current on coupon payments up until this date. A number of Hellenic Group bondholders were unhappy about the prospect of losing their money on this bond and lobbied to obtain reimbursement from Chase. The essence of their complaint was that CMTL should have given bondholders more information prior to the bond's default, particularly as to certain collateral waivers related to a US acquisition by Synkro. RC recalls, however, that AP was "… not first in the queue" when it came to lobbying Chase for compensation and was much calmer in his discussions than many other Hellenics.
392. AP did however discuss the Synkro issue when he met with MF and RC at the Polemis offices on 28 November 1995 in order to discuss Springwell's recent instructions to liquidate its $36 million New York IMA. According to RC's note, the meeting was "… dominated by the issue of the default on the Synkro bond". The bottom line of AP's comments was that,

"… whilst he accepts that defaults happen, he thinks that the performance of Chase Trustees in presenting the interests of the investors has been very poor".

RC further noted:

"The New York IMA:

Adam has been dissatisfied with the performance of the IMA for some time and regards the returns that he has received since it was opened five years ago, as disappointing. Whilst there is no direct connection between the Synkro default and the decision to liquidate the IMA, he [AP] did say that the lack of support he has received from the Bank on this issue has resulted in him looking more candidly at his relationship with the Bank. He took the decision to liquidate the IMA now, because recent performance had been good and the value of the investment had appreciated. The proceeds would initially be used to repay debt extended by Private Banking. He would then consider further investment options.

Synkro:

Adam asked to be paid out at par. Marco Ferrazzi stated that this was not a reasonable request. Adam confirmed that there was regular communication between other Greek holders of the bond that that they were all unhappy with the Bank's performance. Adam wanted to know the following:

• who is speaking with the Company (Synkro) and what they were saying;

• who is speaking with the Mexican banks involved in financing Synkro;

• who is speaking to Lehman Brothers, Synkro's financial advisors.

Spread on Emerging Markets Leverage:

Adam informed us that as a result of the Synkro problem, he has entertained an approach from Merrill Lynch on a line for leveraging emerging markets paper. The line is for $40MM and has a spread of ½% compared to the 1% on the Chase facility. Adam is inclined to accept the facility, particularly as the line with Chase is almost fully utilised. As a result of Merrill Lynch's offer Adam approached the Bank for a decrease in the spread that he pays to ¾%. He was disappointed that he had yet to receive a positive response from the Bank to this request."

393. This note records, and other evidence showed, that AP used the Synkro default and the lobbying of the other Hellenic Group customers, together with the threat of moving his investments elsewhere, as leverage to try to secure better terms for his emerging markets credit line with Chase. This was an effective negotiating tactic because in about December 1995 Springwell's spread was indeed reduced from 100bps to 75bps on future deals.
394. The Synkro issue was still unresolved when MF left the Hellenic Group in 1996. At the time that SG took over as head of the Hellenic Group, there was a general perception that it was affecting relationships with the Hellenic clients and so he pushed with his superiors to find a solution. By late January 1997, Synkro had made a restructuring proposal to bondholders. Under this proposal, new notes would be exchanged for defaulted notes at 50 cents in the dollar; the new notes paid 12% interest semi-annually. This still represented a substantial loss to investors, which the Hellenic clients pressed Chase to make good. On 16 January 1997, SG discussed Synkro's restructuring proposal in a meeting with a representative of the Hellenic bondholders, who were claiming to be extremely dissatisfied with the proposed settlement. SG proposed to his superiors a goodwill gesture to Hellenic clients that would result in a total 70-75 cents in the dollar recovery for the Hellenic clients, which would cost Chase $4 million in total.
395. In April 1997, it was agreed within Chase that a special zero coupon note, the "G-Note" would be offered to all customers who had bought the Synkro bond. The net effect of the Note was that a subscriber could purchase $100,000 of the G-Note, which was due to mature in three years, at a cost of $63,000, thereby enabling the subscriber to recoup an additional part of its losses on top of any returns on the restructured Synkro bond.
396. The evidence showed the G-Note was to be offered entirely on a good will basis, as a good faith gesture to some of Chase's most important clients. It was clear that Chase's intention, at least, internally, was not to underwrite its clients' risk, but rather to appease them for goodwill reasons.
397. The G-note was offered to Springwell under cover of a letter dated 3 September 1997, which stated: "This offer is being made on your behalf in recognition of your special status as an outstanding and valuable client of the Chase Manhattan Bank". Five days later, AP discussed the offer with JA, who said the net effect of the G-Note proposal, taken together with the restructured Synkro bond, would be that clients would get back the equivalent of 70 cents in the dollar on their original Synkro investment. AP also discussed the G-Note with FS on 10 September 1997. The evidence showed that AP was satisfied with Chase's resolution of the issue.
398. As with all the other Hellenic Group bondholders, Springwell subscribed to the G-Note, buying $5 million at 63.52%. Chase received Springwell's executed acceptance letter on 17 October 1997. Chase sent Springwell a confirmation letter, dated 21 October 1997, noting that the G-Note offer had been made "… in recognition of your special status as an outstanding and valuable client of the Chase Manhattan Bank".
399. I reject Springwell's suggestion that the Grupo Synkro incident was an example of Chase accepting responsibility "for investment advice which it had given". "Investment advice" was not an issue in the Synkro negotiations; the evidence showed that the Hellenic customers' complaint was to do with a perceived lack of provision of information by CMTL. Moreover, Chase made customers aware that the G-Note offer was nothing more than a goodwill gesture, as the correspondence between Chase and Springwell showed. Indeed, AP recognised this in his own witness statement, where he stated:

"… it was explained to me that Chase was not legally responsible for the failure in terms of being obliged to make repayment to investors in respect of the failed investments…".

400. In my judgment, SP's evidence on the topic, to the effect that Chase's offer reflected some responsibility "… for recommending a bond that was inappropriate and had a responsibility to make that good" was a self-serving assertion, as it was AP who dealt with negotiations over Synkro, and SP was almost completely in the dark about the matter until close to the time when the restructuring took place.
401. The Synkro default was an instance where AP gained direct experience of a bond in Springwell's portfolio defaulting. However, demonstrating his acceptance of risk in pursuit of reward, he accepted that defaults happened, and continued to invest with enthusiasm in the emerging markets. Indeed, he used the fact of the default as one tool in negotiations to secure better terms for his emerging markets investments with Chase.
402. I conclude that the evidence relating to the Synkro default is of some minor significance to the larger picture, as it showed that AP remained keen to invest in the emerging markets despite an experience of a substantial default.

Attempts by Chase to persuade Springwell to diversify after March 1996

403. In relation to the period from March 1996, when SG took over as head of the Hellenic Group from MF, Mr. Brindle relied on, inter alia, the following passages from SG's oral evidence where, Mr. Brindle contended, SG accepted that the role of the Private Bank involved advising Springwell as to appropriate investments, and in particular as to diversification:

"A. … the key issue is needs identification and making sure that the clients' needs are satisfied.

Q. Can I just understand: that is the key role, you say, of the relationship manager?

A. Yes, sir

…

Q. … did you see it as a relationship manager's job to give advice to the customers as to the appropriateness of investments that they might be minded to go into?

A. I think that, from time to time, advice is called for, yes, sir.

…

Q. … from March 1996, Mr. Adam Polemis did acquire a certain amount of what I would call managed fund investment.

A. That is correct.

…

Q. And the relationship manager, I suggest to you, would have, as would you perceive it, a responsibility to tender appropriate advice to the customer as to the extent to which he ought to invest in these managed-fund type investments?

A. Well, if you use advice with a small 'a', all relationship managers, indeed other people in service industries, give opinions, views, advice if you will, to clients with respect to investment suitability et cetera, and in fact this was a subject that we spent quite a lot of time with Springwell, trying to introduce diversification.

Q. Yes, we will come to a lot of detail on that --

A. To the extent that advising them to diversify is in fact advice, then I accept that because it was prudent.

Q. The question of the mix between asset classes falls within what you have just said, doesn't it?

A. Yes. I think suggesting diversification within asset classes as distinct from security selection within an asset class is an appropriate piece of advice from a relationship manager; that is correct.

…

"Q. I suggest you did think -- in the context of the exchanges a moment or two ago -- it was part of your job, or the relationship manager supervised by you, one or the other, to be concerned with the management of the portfolio in the clients' interest, did you not? Not just a matter of credit.

A. Okay. Let us leave the credit out for a second, okay? Relationship managers – and indeed in this particular case I took it upon myself to give special attention to the particular point that it is appropriate and prudent for clients to have a diversified asset allocation. To the extent that we believe that to be appropriate, if you will, practice, then in their particular case we brought it to their attention on a very continuous basis.

Q. Yes. It was also a matter of your responsibility, you and/or the relationship manager's responsibility, to ensure that the client had an appropriate mix of asset classes in which he was invested?

A. I think the term 'ensure' is a very strong term.

Q. I think I will take that back. 'Ensure' is too strong.

A. It is very strong, as a matter of fact.

Q. It is very strong.

A. I think it is our responsibility to provide prudent advice to the client and if the client -- you know, you bring the horse to the water and if he doesn't want to drink it there is nothing that you can do about it."

…

"Q. Would it be right that from your point of view you were more concerned with diversification across asset classes rather than within the emerging market asset class?

A. Yes, that is correct."

…

"Q. Yes. Then your next contribution, you say: 'For a while, and dilute down that exposure, anyway, all we can do is to give him the advice we think is best and we will act according to what he thinks.' So you are clearly recognising that this is a matter where you ought to be giving, and will be giving, advice to Springwell; right?

A. And it is clear that there is a presumption that he will do exactly what he wants.

Q. Yes. But 'all we can do is to give him the advice we think is best', that was how you saw it, genuinely saw it at the time?

A. That is customarily what we always try to do."

…

"A. … it is prudent to always understand clients' intentions and to make sure that they understand effectively what they are doing."

404. Mr. Brindle also strongly relied upon what SG had said and done in relation to various proposals made by him to persuade AP to invest in Chase managed funds with a view to achieving a limited diversification of Springwell's portfolio amongst asset classes. Mr. Brindle submitted, in effect, that the repeated, but allegedly inadequate, attempts of SG to persuade AP to diversify Springwell's portfolio reflected a recognition on SG's part that the Private Bank indeed had an obligation to advise SW as to the need for diversification.
405. The evidence in relation to SG's attempts to persuade AP to diversify Springwell's holdings (insofar as it is relevant to the issue of the existence of a duty of care, as opposed to the issue of breach) can be briefly summarised as follows.
406. SG, who was an extremely impressive witness, had known the Hellenic Group of customers from earlier days in Chase's Global Shipping Group. He moved to the Private Bank in March1996 to become head of the Hellenic Group within the Private Bank. He was based in New York but would make trips to London and Greece as the business required. On taking up his new position he found that the Private Bank's capabilities had grown considerably since he had left CMB in 1986 when CMB's international customers did not use the Private Bank to invest their money to any great extent. By the time he returned, however, the Private Bank had a much larger customer base, and offered a wide range of investment options, both directly and indirectly (through products developed in other areas of the Bank). He explained that he discovered that customers of the Hellenic Group had been active investors in emerging markets products for a number of years by the time he joined in March 1996, and it did not surprise him that emerging market investments were a very popular product for the Hellenic Group of customers. He explained that he was responsible for those Hellenic Group customers who dealt with CMB in New York and Switzerland, as well as those in London. His role did not involve day to-day contact with the customers, as that was the job of the relationship managers. He did, however, have ultimate responsibility for: (a) customer satisfaction; (b) any Private Bank credit exposure and (c) the profitability of the Group. He explained that, if, additionally, the Private Bank was the department within Chase that had the greatest credit exposure to a customer, then it was also responsible for the one-obligor management for that customer: whichever department had the greatest exposure was given this role, which entailed obtaining a credit allocation for all that customer's facilities, in all the different areas of the Bank, and ensuring that it knew the customer's total exposure, and that this was accurately reported.
407. His evidence (which I accept) was that by 2007 he had known AP and SP for approximately 25 years. He knew that AP was the principal decision maker on the investment side of the business and regarded AP "as a personable individual, knowledgeable in the fields in which he was involved, and a capable and fully competent businessman." He explained that Chase had never had a complete picture of the Polembros Group's financial position, because, as was common with most of the Hellenic Group shipping customers, they did not provide Chase with traditional accounting information about their finances. He described AP as having

"a very high energy level, and a good sense of humour. He was a good customer to socialise with. One could always see [AP] if he was in town, either in London or Athens. His brother was, however, less accessible."

408. He estimated that he would have met AP approximately 4 times a year, and SP once or twice, normally in conjunction with AP. He explained that, often when in London he would arrange a dinner, or similar social function with AP, which he would attend together with other Chase representatives, such as FS, JA or RC. He described how AP's conversations with him were overwhelmingly focused on his investments, far more than on the shipping business, and that AP told him on many occasions that he made far more money from his emerging markets investing than from the shipping business. SG was aware from these conversations that AP dedicated a great deal of his time to managing Springwell's investment portfolio, and contrary to the allegation in paragraph 35(b) of the RADC, formed the clear impression that AP had a keen interest in investment and the management of Springwell's portfolio. From his conversations with AP, he regarded AP as an experienced and sophisticated investor, with a great deal of knowledge about the bond markets, and the instruments that Springwell was investing in. He explained how AP would express his views on the markets, bonds, prices and investment opportunities, and that he never appeared out of his depth, or lacking in knowledge and understanding of these topics. He also had several conversations with SP in relation to the Synkro issue, which gave him the impression that SP was well-informed about both the Synkro situation, and Springwell's investments generally. He never doubted that both AP and SP were sufficiently sophisticated to understand, and purchase, emerging markets paper, and to understand the risks associated with such activity. This view had been reinforced by his experience with dealings with the Polemis brothers in relation to the Grupo Synkro issue.
409. When SG made his regular trips to London or Greece from New York, he and FS often met for lunch or dinner with AP. According to FS's and SG's evidence, on those occasions SG made repeated suggestions to AP to diversify Springwell's holdings. The evidence showed that SG tended to stress the need for diversification to all of his customers, including Springwell; that when he arrived at the Private Bank in 1995, Springwell had an IMA account invested in assets other than emerging market assets, but AP was unhappy with the returns from that investment; that AP regarded taking money that could be invested in emerging markets, and investing it in other, lower returning assets, as costing him money, rather than protecting him; that in discussions with AP, SG would usually tell him that the various funds and products Chase offered represented sound diversification options, and that diversification, so as to avoid concentration of risk, made good sense; but although AP would normally express polite interest in the funds put to him in discussions with SG and FS, would usually be positive, and give the impression that he was open to suggestions and interested in what SG had to say, he was usually non-committal and SG sometimes got the impression that he was giving AP a message which AP did not want to hear. However, in the end, AP was generally not keen to pursue the diversification ideas put to him.
410. SG's evidence was that he was satisfied that AP understood the issues and the dangers of leaving all his eggs in one basket. AP's response, however, to SG's diversification suggestions was to say that he did not make enough money in investing in anything other than emerging markets assets. The evidence showed that AP was deeply resistant to any measure of diversification which detracted from his trading in emerging markets. Faced with such an intractable client, SG's evidence was that he took a practical course: to start slowly and attempt to make AP comfortable with the concept of diversification, to open the door to the idea, and then to take it from there. He hoped that, once AP saw the track record in the alternative investments, he would be amenable to further investments.
411. In his oral evidence, SG explained this strategy in the following terms:

"You know, this particular client had a heavy concentration in emerging markets. It was a pattern of behaviour that went back many years. There are two elements to introduce diversification: one is to get the client to even think about it; and then, secondly, to introduce it. Now it is highly unlikely and unrealistic to go to a client and discuss diversification among asset classes and then perhaps suggest some alternatives and then assume that the client is going to leap – you know, not only go to the water and drink, but jump in. It is highly doubtful. You introduce the client in a, if you will, conservative fashion."

And then:

"Gradually I would like to have seen the client reduce his exposure. I do not think that there is any particular limit of diversification that I had particularly in mind. I was still at the first stage: get the client interested in a diversification; and then secondly, start to introduce him to other asset classes; and thirdly, get him to at least invest enough so he could follow a track record and build his own confidence level in those particular asset classes as being suitable."

412. As part of this process, and consistently with it, SG's evidence was that he regarded it as an unrealistic position that AP could be persuaded positively to sell his emerging markets assets, so as to invest in managed funds or other diversification measures. Instead, SG took the view was that AP should be using his realisable cash, whether from shipping or from the maturity of instruments in the portfolio, to make such investments. (It was common ground that the portfolio did throw off a lot of cash, particularly with the maturity of short dated instruments such as GKO Notes.) Despite SG's best efforts, AP preferred to invest most of his available cash in further emerging markets instruments.
413. However, as Mr. Brindle pointed out, the Private Bank, whether by SG or otherwise, did not give advice to Springwell as to the need to diversify within its emerging markets portfolio, or to reduce the extent of the Russian concentration within that portfolio. Nor did the Private Bank ever advise that there was a need for immediate and substantial diversification out of the emerging market asset class on the express grounds that the undiversified portfolio Springwell had in emerging markets was very high risk, highly concentrated in Russia and (as Springwell contended) dangerously exposed to loss. Mr. Brindle submitted that those facts were not merely relevant to the issue of breach of duty, but were also relevant to the issue of the existence of any duty of care. He submitted, in effect, that the starkness of the situation with which the Private Bank was faced, namely a client with an increasingly large exposure in emerging market debt securities, concentrated in Russia, and the knowledge that AP was relying on the recommendations of JA, imposed an obligation on the Private Bank to give urgent and clear diversification advice.
414. The specific proposals for diversification put by SG to SP to invest in managed funds were as set out below. On the one hand, Chase contends that these were in effect marketing approaches by the Private Bank; on the other hand, Springwell, whilst accepting that these approaches were indeed marketing approaches, soliciting investments in specific funds, contends that these proposals show an acceptance on the part of the Private Bank officials that it indeed had a responsibility and obligation to advise Springwell in relation to the composition of its portfolio and the need for diversification.
415. A proposal that Springwell should invest in various funds, including a London Diversified Fund, a Chase Multi-Strategy Fund ("MSF") and a Chase Secured Loan Note Fund was discussed between JA, FS and SG with AP on 1 October 1996. SG's evidence was that at those sort of meetings he would strongly push the diversification message, but that most of his suggestions were ignored. SG's evidence, (which I accept) was that he would have liked AP to have invested US$ 25-50 million in each of the three funds discussed, and that those were the figures he would have pressed for at the meeting.
416. In the event, Springwell ultimately invested a mere US$ 5 million in the MSF, with an effective date of 1 May 1997. The funds were generated by leveraging the assets purchased on a spot basis. Moreover, as AP frankly accepted in cross-examination, he had in fact made Springwell's investment in the MSF conditional upon Chase's prior agreement to a reduction in the interest rate applicable to his margin forward programme.
417. From April to October 1997, a proposed investment in an equity IMA was discussed on several occasions. Thus on 16 April 1997, at a meeting between SG, FS, Hank Gooss (who was head of the Investment Management Group in New York) and AP, Hank Gooss was introduced to AP to discuss the possibility of Springwell re-investing in an IMA. This was in addition to the US$5 million investment in the MSF which had already been mooted. Despite apparently agreeing to the idea at the meeting, AP later decided not to pursue the IMA. An internal memo in about June/July 1997 recorded that Chase was continuing to suggest that further diversification should be considered and that the current proposal put to AP at that time was an equity based IMA which AP had agreed he should strongly consider. A note of a conversation on 16 July 1997 between JA, FS and SG recorded that SG was meeting AP for dinner that evening and was going to try to "collar" AP into a European equity IMA and further how AP was always difficult to pin down, despite the fact he appeared enthusiastic about diversification ideas initially.
418. JA discussed the proposed equity IMA with FS in a conversation on 24 October 1997 and told FS that he had met with AP on 22 October. JA told FS that, after seeing a Hermitage Two Fund brochure^[98] in AP's office, JA had once again impressed on AP the need to have some equity exposure in the Springwell portfolio, in the following terms:

"I said: 'Listen Adam I am not an equity I am no expert but one thing I do understand very well is that … you are very well diversified within Emerging Markets Debt but you have no First World Debt you have no First World Equities and you have no emerging markets equities … And you have got to have some you should have some equities, you don't have a 500 million dollar f***ing portfolio with no equities anywhere'.".

419. I accept that JA had said words to this effect at his meeting with AP on 22 October 1997. Nevertheless, the suggestion to invest in an equity IMA was not taken up by AP at this time, or at any later stage.
420. JA had several conversations with AP in early 1998 in which he raised the need to diversify Springwell's portfolio out of emerging markets into a wider portfolio of, for example, GIO equities. Thus, for example, in a lengthy telephone conversation on 29 January 1998, JA was supportive of the diversification advice that had been given by SF and FS, saying to AP:

"… you don't even have to have lunch with him, you know what [SG's] going to say".

AP remarked during this exchange: "I know it's going to cost us another five million minimum". JA responded:

"The point is that actually … you know he has actually got Springwell's interests at heart … and his concern … is the 610 million dollar portfolio in pure emerging market debt, there's no equities, there's no G10 countries in there, there's no broad diversification and we're talking about ¾ billion dollars here we're not talking about a small amount of money we're talking about a lot of money and you're telling me you want to put another 200 million dollars away which I agree with you but you it has to be done and I know you only there's only one of you…".

AP then asked:

"OK so what do you suggest that we give actually to Finn like 50 million, not five?"

JA responded: "Yeah...yeah I do." JA went on to explain that he thought that AP should give $50 million to fund managers to manage and that AP should definitely have a portfolio of European equities.

421. Following further conversations in February, on 24 March 1998, JA gave clear and emphatic advice to AP to diversify outside the asset class of emerging markets and to invest at least US$ 30 million outside emerging markets. This was followed by a meeting between SG, FS and AP on 26 March 1998 at AP's office, at which SG and FS attempted to persuade AP to invest US$ 15-20 million in a customised MSF (to which AP agreed), and also to put US$ 10 million into an equity fund.
422. In April 1998, SG put two formal diversification proposals to Springwell, in letters dated 8 and 9 April 1998. The first proposal, under cover of the 8 April letter, was for a diversified equity portfolio comprising 30% US equities, 60% non-US equities, and 10% cash. The 8 April letter stated:

"… As I recall very clearly from our conversations we talked about four ideas, all of which you expressed a very positive disposition to proceed with. This letter covers the subject of a diversified equity portfolio which we have discussed on and off for the last year.

…

As we have discussed many times in the past, you should be extremely pleased with the investment results which you have achieved in the Emerging Markets arena. We have not been inclined to discourage the commitment you have with this asset class, per se. However, as I have said on many occasions, and Justin has agreed, there is ample room in your portfolio to consider diversification alternatives which will give you, over time, similar returns to those you have enjoyed in Emerging Markets. This is especially desirable today as increasingly you need more concentration to achieve the same historical results.

One such diversification strategy which we still feel very strongly about is our recommendation to proceed with a diversified equity portfolio.

…

… This portfolio recommendation, together with our customized Multi-Strategy Fund proposal being completed today, represents, in our judgment, a very realistic starter kit for diversified returns where you can expect over time a very favourable comparison with your Emerging Markets portfolio.

If you concur, I would like to get started on this investment program as soon as possible. An ideal initial portfolio investment, which we believe will achieve the objectives as set forth here, would be $20million. Obviously, we can do it for less but this, together with a customized Multi-Strategy Fund investment of a similar amount, would give your overall portfolio the diversification that we think is desirable. …"

Attached to the 8 April letter was the detailed proposal setting out in clear terms the asset allocation suggested, the benefits of the proposed equity proposal, the market outlook for equities, the historical returns and the projected future returns.

423. The covering letter of 9 April 1998 enclosed the proposal for a more aggressive customised MSF, and highlighted some of the key features of the presentation. It continued as follows:

"… In order to achieve the portfolio objectives, a minimum account size of $10million is required. We shall be doing this portfolio for a small select group of clients and we intend to accept a minimum of $50million. In your case, I believe an account size of $20million makes more sense to achieve your diversity objectives, and up to that amount would be available for you should you desire.

… I am very excited about this new concept. Considering the price levels in today's traditional markets combined with the inevitable volatility risks, this investment represents a very potentially important diversification to your portfolio and gives you access to managers, which in certain cases are closed or difficult to access. …

We would like to have your in-principal [sic] commitment as soon as possible since we would like to move toward a closing by the 15^th of May. …"

424. These proposals together with the covering letters of 8 and 9 April were faxed to AP in Greece, and the originals were sent to the Springwell office in London.
425. I asked SG what he considered would or could have been an adequate diversification figure. He said that this was difficult to say but that, for someone with a high risk profile such as AP, a figure of around 60% emerging markets and 40% other asset classes would not have been out of the question. SG went on to say that the fact that Polembros also owned a largely unencumbered fleet was a further factor in overall considerations of diversification, and that this made the degree of concentration in the investment portfolio a lot more justifiable. Indeed, this was a point used by AP at the time to justify his refusal to diversify. SG made clear that he himself did not have such a number in mind at the time. His focus was not on an ultimate optimum portfolio balance; it was on trying to introduce the concepts to AP and to give him the experience of and comfort with alternative investments to be able to develop a more diversified portfolio.
426. In fact, despite various attempts to get AP to commit to the 1998 MSF, AP had not read SG's covering letters or presentations by 1 May 1998 when FS spoke to him. Nor did he ever read them. However, during their conversation on 1 May, AP finally agreed to a commitment of $10 million of new monies to the MSF and agreed to leverage his existing MSF to the extent of 50%, thus releasing an additional $3 million for investment in the more aggressive customized MSF. JA commented to FS that although AP threw his money at the emerging markets business, it was "like getting blood out of a stone" getting AP to diversify. Finally, after some prevarication by AP, the IMA for the $13 million investment in the MSF was signed on behalf of Springwell on 15 May 1998. It appears that FS took the document to the London office of Springwell in order to get the signature and meet the deadline for investment in the fund.
427. AP clearly regarded SG's repeated attempts to market managed funds to him as a nuisance. Thus, for example, AP told JA, in the context of a conversation about diversification on 29 January 1998, that he had accepted a lunch invitation with FS "which is going to cost me another, you know … I'll be lucky if it only costs me five, right?" And on 25 March 1998, JA told FS that at a dinner the previous night, AP had joked that "… every time I see [SG] he tries to get money off me." In his oral evidence AP emphasized that he did not regard SG's attempts at marketing, as seeking to implement a strategy for diversification:

"I can say vaguely that I do have a recollection because we had – at least twice a year we had – I would not call it a meeting – we had lunch or dinner with [SG], when he was coming over from the States. As a matter of fact I don't believe we ever had a meeting to sit down and discuss about any diversification. It was all lunch or dinner and it was only when he was coming from America and I am – and that suddenly the diversification would appear out of the blue twice a year when [SG] was visiting from America."

428. However, Mr. Brindle submitted that the role played by SG in connection with the diversification issue was wholly inconsistent with the notion that he was merely playing the role of a salesman. He submitted that, in the letters of 8 and 9 April, SG was not engaging in general sales talk; he was, rather, making specific recommendations to Springwell, supported by his explanation as to why he judged them to be appropriate for Springwell; he expressed opinions not only as to the products being recommended, but also as to the appropriate level of diversification in Springwell's portfolio as a whole, and, in particular, as to Springwell's emerging market investments. Thus, submitted Mr. Brindle, SG's statement, in his letter dated 8 April 1998 that "we have not been inclined to discourage the involvement you have with this asset class [i.e. emerging markets] per se" was significant since it indicated:

i) that the Private Bank would have advised Springwell to reduce its emerging markets portfolio if the Private Bank had thought that the portfolio was unsuitable for Springwell; and

ii) it indicated that although there had been some reference to diversification before this date, SG had not been promoting a substantial shift of the portfolio out of emerging markets and had not been warning that the portfolio was "dangerously exposed". In those circumstances, submitted Mr. Brindle, it was only natural that AP should take comfort from the fact that SG was not seeking to discourage Springwell's commitment to emerging markets.

Conclusion in relation to Key Issue 1.1 in relation to the period 1990-1998: Did Chase owe a contractual and/or tortious duty of care to Springwell to advise it as to appropriate investments?

429. Having considered the facts relating to the relationship between Springwell and Chase during the period 1990-1998, not only those set out above, but also the extensive further evidence referred to in the parties' closing submissions, I conclude that neither CMB, CIBL or CMIL owed contractual or tortious obligations to Springwell to advise it as to appropriate investments, or as to the structure of its portfolio, either in the wide terms alleged, or otherwise. The reasons for my primary conclusion, that no duty of care existed, can best be summarised by reference to what I regard as the relevant, or arguably relevant, factors pointing to or against the existence of such a duty, and by reference to my conclusions on the arguments raised by the parties in relation to such factors.
430. I summarise my conclusions under the following heads:

i) the sophistication of AP/Springwell as an investor;

ii) the absence of any written advisory agreement;

iii) the presence or absence of the indicia of an advisory relationship;

iv) the actual role played by JA (including the purpose for which he was giving AP recommendations or advice) over the relevant period 1990-1998; and the extent of AP's reliance on JA and the Investment Bank to provide an advisory service;

v) the actual role of the Private Bank, over the relevant period 1990-1998 and the extent of AP's reliance on the Private Bank to provide an advisory service;

vi) the terms of the relevant contractual documents and disclaimers: these raise the following issues:

a) their general effect;

b) the construction of particular clauses;

c) the effect of particular clauses and, in particular, whether Springwell can avoid their apparent effect, because such effect was allegedly inconsistent with the existing advisory relationship between Chase and Springwell:

d) whether Springwell can avoid the apparent effect of the Relevant Provision on the grounds of:

i) breach of fiduciary duty;

ii) the application of the principle in Interfoto v Stiletto;

iii) misrepresentation;

iv) unilateral mistake;

v) estoppel by convention;

vi) the application of relevant provisions of the Unfair Contract Terms Act 1977/ Misrepresentation Act.

vii) the regulatory background.

The sophistication of AP/Springwell as an investor

431. Mr. Brindle submitted that, in the determination as to whether a duty of care arose, one of the key features to take into account was the fact that Springwell was an unsophisticated investor, entirely reliant upon Chase, and that Chase was well aware of this dependence. He submitted that, although, over time, as a result of their experiences with Chase, Springwell became more familiar with emerging markets investments, Springwell never had any facilities or aptitude for making any sophisticated analysis of the risks and rewards in such investments, and relied throughout on Chase, and on JA in particular. He submitted that, although Springwell came to have a portfolio of investments worth over US$600m, AP, in fact:

i) had no education in finance;

ii) tried to deal with Springwell's investments while running the Polemis Group's shipping business and spent only half an hour or an hour a day on Springwell's affairs mainly on the telephone to JA;

iii) had, unlike other Greek customers of Chase, no in-house specialists to assist him;

iv) used no computer system to record his investments, instead keeping records of his investments in manuscript in an A4 notebook,

v) used no computer system to monitor and analyse his investments and relied on JA for financial information and analysis;

vi) had no access to Bloomberg or other sources of pricing information, relying instead on JA for prices;

vii) was well known within Chase for not reading research items or contractual documentation;

viii) took a long holiday in August of each year (including 1998), but tried to deal with Springwell's investments while on holiday; and

ix) relied heavily on, and trusted, JA, both in relation to Springwell's portfolio at Chase and in relation to its portfolio at Merrill Lynch;

x) held all of his investments with one bank, Chase (save to the extent that assets had to be transferred to Merrill Lynch from time to time).

432. I cannot accept this submission. In my judgment the evidence, much of which I have summarised in the narrative section of this judgment, belies Springwell's factual case of supposed lack of sophistication and ignorance. In coming to my conclusion that Springwell was indeed a highly sophisticated investor, I rely, in particular, on the following facts and matters, as identified in the narrative above (and in Chase's closing submissions), and upon my assessment of AP and SP when giving evidence:

i) The Polemises had vast experience in the highly competitive and volatile shipping industry and were well able to understand and assess the concept of the correlation of risk and reward. In everything they did, the Polemises brought to bear their undoubted acumen and business sophistication.

ii) By the time AP first began dealing with JA, the Polemises had also had significant experience of banking and banking products. They had invested for some time in time deposits and had purchased and speculated in foreign currency transactions. They certainly had more than enough experience and sophistication to be able to make their own minds up about investing in ECP.

iii) By the 1990s, AP had shifted his focus to the emerging markets, a more specialist asset class. Obviously, when Springwell purchased its first emerging markets asset, AP had had no prior experience of such a purchase. However, it was a development from what he had already been doing with Chase. Further, investment by investors (other than banking and other large financial institutions), in emerging markets was in its infancy at the time and, indeed, the Polemises had, through their shipping business, as much, if not more, experience than most others in the emerging markets, in particular in Brazil.

iv) In any event, and whatever the position was as regards AP's early emerging markets purchases, he rapidly acquired vast experience in that asset class. Springwell's portfolio grew with the explosion of the emerging markets business in the early 1990s and AP was at the forefront of emerging markets debt investments. Throughout this period, he acquired personal and direct experience of the volatility of the markets, for example through the Tequila crisis.

v) Certainly, by the mid-1990s if not long before, AP was a hugely experienced and sophisticated emerging markets investor. He had by that stage a very lengthy track record, involving the purchase of large amounts of debt over several years. He was actively interested in the emerging countries' debt markets and continued to invest heavily throughout, each year building up his already significant reserves of experience and knowledge

vi) None of the features identified by Mr. Brindle, as set out in the previous main paragraph of this judgment, on a full analysis of the evidence go anywhere realistically near to establishing the alleged total lack of sophistication on the part of AP or SP. Thus, although Springwell may not have maintained computer records of its investments, nor have had computer programmes to monitor and analyse its investments, nor have had access to Bloomberg or other sources of pricing information, nor have had an in-house specialists to assist AP, the reality was that AP and SP paid scrupulous attention to Springwell's investments. Thus AP kept a detailed daybook, in which he maintained detailed records on the day of purchase, of the individual investments purchased, including yields and maturity dates; likewise SP kept meticulous investment ledgers, based on the confirms sent out by Chase, recording in detail (albeit sometimes well after the trade dates) records of prices, and other relevant terms and aspects of the investments. He also calculated and recorded yields and returns. The Polemises were clearly highly numerate, so I do not regard it is significant that these records were maintained in manuscript form rather than on a computer. Moreover, they received and scrutinised the confirmations sent out by Chase and often raised queries and identified errors in those documents, no matter how minor the error.

vii) Moreover JA's evidence, which I have set out extensively in the earlier narrative section of this judgment, showed that, in addition to JA faxing information to Springwell about available investments so as to enable it to decide what to buy or sell, Springwell (as with JA's other clients) also received, on a regular basis, a considerable amount of information, in the form of Chase research material, information memoranda and prospectuses about proposed investment opportunities. The transcripts show that, although AP may have had no appetite to trawl through the research material in any great detail, he certainly read some of it, if only superficially, from time to time, and was always keenly aware about the commercial terms (price, yields, maturity dates etc.) of the investments JA had on offer. He was definitely not an innocent abroad.

viii) The evidence (as summarised in the narrative section of this judgment) demonstrated that AP was well able to use his position as a valued client of Chase to negotiate better terms in relation to leverage, whether by threatening to terminate, or indicating that he would increase, Springwell's IMAs or by other means.

ix) The contemporaneous views of Chase personnel, without exception, were that Springwell presented as a sophisticated investor in emerging markets. The Chase evidence in transcripts of informal discussions between FS and JA to the effect that AP was dismissive of written documents, cannot dispel this.

x) Notwithstanding that he may have been on holiday, AP kept in contact with JA and was clearly making investment decisions on behalf of Springwell.

xi) The evidence relating to Springwell's dealings in emerging markets instruments with other banks and financial institutions, both before and after the Russian default, shows sophistication on the part of Springwell and the Polemis brothers. Thus, the Polemises were content to sign similar contractual documentation, and to make similar representations, to those which they signed with or made to Chase. For example, Springwell signed and accepted non-private customer letters with ML, prior to the signing of the 1997 DDCS letter with Chase. Springwell also signed and agreed to a GMRA with ML prior to signing the same form of document with Chase. After the Russian default, Springwell and/or other Polemis Group companies signed documentation with SBL and with the Argo Fund confirming their sophistication and experience in emerging markets and their awareness of the risks. Likewise those other banks and institutions, on similar material that was available to Chase, characterised AP, Springwell and other Polemis companies as expert investors.

xii) I accept that the evidence (both the transcripts of internal conversations between Chase personnel and cross-examination) clearly showed that FS, JA and RC knew (at the latest from 1994, and probably at all material times) that AP would sign documentation without reading it. In refer in particular and by way of example to the following two transcripts:

"Q. It is the contribution five up from the bottom that I want to ask you about, where you say: 'No no no this is one of the fortunate relationships. If I physically deliver some documentation, they'll sign it.' That was the reality of the matter, was it not?

A. I cannot deny it. It is here.

Q. Sorry?

A. I cannot deny it. It is here.

Q. But it was true? That was exactly how it was with Springwell; yes?

A. Correct.

Q. There were other Greeks who I think did read documents, but they did not. If you brought it round, they would just sign it; yes?

A. True."

"Q. 'Well, Christ, I mean -- Springwell, when I go round to them, they'll just sign. If they'll ask me two questions about a thick passage and if I think -- if it looks as if I know what I'm talking about, they trust us and sign it.' And Mr Eddy seemed to agree: 'They're not going to read a 20-page document but [somebody else] does ... He's sitting there probably sweating trying to read the bloody thing.' That is Eddy. So that is the same point we had a little earlier, is it not?

A. Yes, it is.

Q. It is some other Greek -- it does not matter who it is -- who is going to sweat through it, but the Polemises, they just sign.

A. Correct.

Q. The reason they sign is because they trust you?

A. Yes."

However, that fact of itself was not an indication of Springwell's lack of sophistication.

433. Accordingly, Springwell's state of financial sophistication, although obviously not, in relative terms, comparable to that of Chase, as a major financial institution, is not, in my view, a strong pointer towards the existence of a general advisory obligation, as Mr. Brindle sought to contend. On the contrary, coupled with the contractual documentation, it is a pointer against the existence of any such duty.

The absence of an advisory agreement

434. In my judgment, the absence of a written advisory agreement between CMB and Springwell does not of itself predicate that no free-standing duty of care to give appropriate investment advice, whether based in tort or contract, could have come into existence between the respective Chase entities on the one hand, and Springwell on the other. But, in context, it is a strong pointer against the existence of any such duty. Although it was common ground that at the relevant time there was no regulatory obligation upon Chase to record the terms of any investment advisory agreement, or advisory obligation, in writing (at least in relation to a client such as Springwell), the absence of any written agreement recording such a relationship, between substantial commercial parties, where the investment activity involved complicated transactions, involving huge amounts of money over many years, is surprising (to say the least), if indeed such a relationship existed. The narrative shows that it was Chase's habitual, albeit not invariable, practice to record the terms of its contractual relationships in written documents; the IMAs were examples. If Chase had assumed such a responsibility, one might have expected that not only would it have defined the scope of its duties in a written document, but also put in place an appropriate, agreed fee structure for the investment management/ advisory services it was providing. One also would have expected such advice to have been provided to Springwell by an investment advisor, rather than a salesman, but Springwell argued that that point went to the question of breach, rather than the existence of a duty of care.
435. Mr. Brindle submitted that the fact that there was not some sort of fee structure in place was not a counter indicator to the existence of a contractual obligation on the part of Chase to advise, since the spread or commissions on transactions were in themselves sufficient to provide consideration for the service, and an incentive to provide it. He relied upon the evidence of Chase's private banking expert, Mr. Saunders, in this respect, who said that

"remuneration for an advisory service would have encompassed commissions on transactions, spread on foreign exchange, bank interest, margin and custody fees, together with any fee sharing with other divisions. As with discretionary clients, though with much less success, there have been attempts to move to an advisory fee approach with a more standardised client service offering tailored to the client's perceived risk profile."

436. Whilst I agree that the absence of a separate fee for the advisory service is not in itself necessarily significant, nonetheless one might have expected that a written agreement would have set out the fact that Chase was indeed taking its fees for the advisory service it was providing, in the form of commissions etc. rather than by way of separate fee, if that was indeed the fee structure.
437. The expert banking evidence on this topic was of limited assistance, since neither Mr. Saunders (Chase's expert), nor Mr. Dicker (Springwell's expert), had any personal experience of a bank assuming obligations to give investment advice, without there being an underlying written agreement (which in itself is perhaps significant). Both agreed as to the prevalence in practice of written advisory contracts. As they themselves recognised, to some extent their different views reflected their different experiences and working environments.
438. In Mr. Dicker's experience, the standard set of terms and conditions for opening an account with a private bank would include an obligation on the part of the bank to provide an advisory service, but, for a discretionary management account, a separate agreement or terms and conditions were needed. Mr. Dicker expressed the view that a client of a private bank could become an "advisory client" by "default" and did not accept Mr. Saunders' view that the absence of a signed advisory agreement strongly suggested that no advisory relationship was intended. But Mr. Dicker's view was clearly based on his experience that a client would in fact sign a written contract including an obligation on the part of the bank to provide advisory services, as part of the initial account opening procedures. Indeed, when, in cross-examination, the Springwell opening account documentation was put to him, and he was asked, as a market professional, whether, if there had been an advisory relationship at that date, he would have expected to see a very great deal more by way of documentation of it, he replied that he certainly would have expected a lot more than what he had been shown.
439. Mr. Saunders' view, namely that a written advisory contract would be required to start an advisory relationship, as would a discretionary agreement for a discretionary account, in addition to the standard forms which merely opened an account, was likewise based on his own experience.
440. In my judgment, in the Chase operational environment of the 1990s, the absence of any written advisory agreement is a significant pointer against the existence of an advisory obligation on the part of Chase. Indeed Mr. Brindle in his closing submissions, when dealing with a question from the Court about the absence of a written advisory agreement, realistically accepted that the absence of an agreement in 1995-1996 would be surprising "as by that time parties were sufficiently used to the concepts that had been introduced [in the regulatory rules]", but submitted that as the picture had to be looked at the start of the relationship in 1987, the position was different and its absence was not surprising. However I have already held that no advisory obligations were assumed by Chase at the time of Springwell's introduction to JA; it is the absence of any agreement throughout the period of the relationship that I consider indicative.

The presence or absence of the indicia of an advisory relationship

441. Apart from the absence of any written investment advisory agreement, the general absence of any indicia of, or reference to, an advisory relationship between CMB and Springwell, in my judgment, points against the existence of any common law duty of care to advise and, a fortiori, any contractual duty to advise.
442. Thus, for example, in the numerous transcripts of telephone conversations between JA and AP, and in the numerous internal Chase documents, there is no evidence that, at any time, AP raised or discussed with JA, or anyone at Chase, the existence or scope of the advisory agreement that Springwell alleges that it had with CMB, CIBL or CMIL. There was never any discussion between Chase and Springwell as to whether any of the former's alleged advisory obligations were limited to advising as to the suitability or otherwise of ECP or emerging market investments, or whether CMB/CIBL/CMIL's advisory obligations extended to advising Springwell generally about asset allocation within a global portfolio. Nor did AP ever discuss with JA, or any of the Private Bank employees, what Springwell's investment objectives were, save in the extremely limited context of his IMAs.
443. Springwell was never provided with portfolio statements, whether on a quarterly or any other regular basis, or, indeed, at all, as is normal in a standard investment advisory relationship, and indeed, as Springwell received in relation to its IMAs.
444. Until the start of the US litigation against Chase in 1999, Springwell never asserted that it had an investment advisory agreement with Chase, or that Chase had assumed obligations to give Springwell investment advice. Thus, when, for example, the alleged advisory agreement is suppose to have terminated in January 1999, no mention was made by AP of this fact, nor was there any recognition of the fact in correspondence between the parties. Likewise, when Springwell was facing substantial mark to market losses in August/September 1998 in the aftermath of the Russian default, no complaint was made by AP or SP at that time that breaches of Chase investment advisory obligations were the cause of Springwell losses. Such matters are not, of course, in any way decisive, but the fact that no articulation of the existence of the alleged advisory agreement or obligation was made, until such a very late stage, may justifiably be regarded as counter-indicative of its existence over the previous many years.

The actual role played by JA (including the purpose for which he was giving AP recommendations or advice) over the relevant period 1990-1998, and AP's reliance upon JA

445. I have already found, as set out above, that JA gave advice to Springwell during his many telephone conversations with AP. That advice variously took the form of recommendations, expressions of views and opinions as to the state of the market, the relevant merits of various investments, or as to what course Springwell should take, whether in relation to a particular investment (i.e. buy, sell, or hold), or, sometimes, more generally. He also went to great lengths to source and present investment opportunities to Springwell. He provided AP information about the market, prices and the securities which were available. Although, no doubt, as JA's business relationship with AP became more established and the portfolio grew in size, their dealings became more frequent, the nature of the relationship did not, in my view, change over time, contrary to the argument propounded in evidence for the first time by AP as part of Springwell's case that JA's role changed from being initially that of a pure salesman to subsequently that of an investment advisor. It may well be that AP came over time increasingly to value JA's advice, as AP saw the substantial profits that Springwell was making in its emerging markets investment portfolio. Likewise, as the size of the portfolio increased, no doubt it became necessary for AP to talk to JA more frequently.
446. Thus I accept, as submitted by Mr. Brindle, that, from the date when Springwell started to build up its investments in Russian and related securities (April 1996), the make-up of the portfolio was clearly influenced by JA and his recommendations. But AP himself (like many other substantial investors at the time in emerging markets) was a great enthusiast for Russia, as became particularly evident in July and August 1998, not merely, or predominantly, because of the often bullish views he had received from JA, but rather because of the substantial returns the Russian market appeared to provide to Springwell. It was AP's desire for profit, I conclude, which drove the percentage of Russian investments in Springwell's portfolio to about 50% by August 1998.
447. I also accept that AP "relied upon" JA to a considerable extent. For example, he relied on JA to provide accurate prices when he asked; he relied on JA to inform him as to the availability of particular bonds or particular issues; he relied on JA to effect his instructions to buy or sell instruments. He also clearly valued JA's views and opinions, and the process of talking things through with JA. He frequently asked for JA's views. He also frequently (though certainly not invariably), made decisions which were in line with JA's views and recommendations. However, he also ignored JA's views on many occasions and made decisions which went against JA's views.
448. But one only has to have listened to the tapes of the contemporaneous conversations – or indeed to have heard AP give evidence – to appreciate that AP was not a man who would blindly or docilely follow the views of someone else. I reject the suggestion (made by AP in evidence, although not in the RADC) that he simply rubber-stamped JA's suggestions. AP is and was clearly a man who made his own decisions. The evidence demonstrated that he had a dominating and manipulative personality, and was a shrewd and sophisticated operator, who, even if he did not have an enthusiasm for, or an in-depth understanding of, the fine detail of certain aspects of some the products under discussion, showed himself to have a keen appreciation of their commercial terms and potential, whether for loss or for profit. He may not have bothered to have familiarised himself with some of the more abstruse points relating to the Russian economic and political situation, but he was well aware of the risks (and potential returns) that a market such as Russia might afford. He was also clearly well aware of the cost and impact of leveraging Springwell's portfolio, under Chase's financing programmes, and the difference between the terms on offer at Chase, and at rival institutions such as ML.
449. But the fact that JA, a salesman employed by Chase to buy and sell emerging market debt securities to Chase customers, was, in that capacity, giving such advice and making recommendations, and that the customer was taking the salesman's advice and recommendations into account, in making his decision whether to buy, sell or retain, and, in that sense, relying upon them, does not in my judgment predicate that a duty of care arises on the part of the salesman. Reliance on its own, even if established, does not necessarily give rise to an advisory relationship, with consequential duties of care. Nor does the fact that JA was, no doubt, extremely keen to make profits for Chase and may have been influencing his enthusiasm to recommend Russian products, predicate that a duty of care arises. All salesmen, from the local butcher to the vendors at a designer dress shop, share that quality.
450. That the giving of such recommendations and advice was part and parcel of the normal role of a salesman in the City of London was not only supported by the Chase employee witnesses, but also by both parties' experts. For example, Mr. Dicker, Springwell's private banking expert, said in his first report:

"… the making of recommendations is central to the function of an institutional salesman."

The evidence of Chase and Springwell's emerging markets experts (Mrs. Alexandra McLeod-Wilson and Mr. Ian McCall, respectively) was to similar effect.

451. Although some witnesses, such as JJ, were reluctant to accept that such recommendations could be characterised as "investment advice", the real point, in my judgment, is not the semantic one as to whether such recommendations are "advice", or "investment advice", in a loose or a strict sense, but rather whether the giving of such advice, on a regular basis, by a salesperson in such capacity, attracts the obligations and duties of care of an investment advisor in respect of the views actually expressed, or indeed, a positive duty to give advice on a wider basis as to the structure, or concentration, of the portfolio within the asset class of emerging markets securities, or as to wider diversification into other asset classes.
452. In my judgment, the advice given by JA over the entire period did not impose upon him, or on his employer, CIBL or CMIL, the duties of care or obligations of an investment advisor or asset manager, as Springwell contended. There is, in my view, a real distinction, as was articulated by JJ (in the passage from his evidence that I have already quoted) between the investment advisor, properly so-called, who is retained to advise a client, usually backed by considerable research, in relation (for example) to the investments which a client should make, the structure of the investment portfolio, asset allocation and diversification, and the advice or recommendations given by a bonds salesperson such as JA, as part of the selling process, who was actually trading and:

"… dealing with markets in a volatile environment that requires that they make decisions based on prices on screens many times a day."^[99]

453. Moreover, at all times AP was well aware that JA was a salesman of a limited asset class, namely first ECP, and then emerging markets instruments, and that it was apparent that he only had those instruments to sell. AP was aware that JA operated separately from the Private Bank. I cannot accept the suggestion that AP ever understood JA to be Springwell's investment advisor. There was never any reference to JA as such by AP, and certainly the transcripts of the telephone conversations do not suggest that AP viewed JA in that capacity. The reality was that they would communicate with each other when Springwell needed to buy or sell something, or when investments were maturing and needed re-investment, or when JA wanted to sell something to Springwell. It was in that context that JA would advise AP. The absence of the indicia of any advisory relationship as referred to below also supports my view.
454. I am not saying that in no circumstances can a duty of care and obligations to advise arise where a salesman in his capacity as such makes recommendations. My conclusion is simply that, in the circumstances of this case, the fact that JA, in his capacity as a salesman, may have been giving advice or expressing his views as to particular strategy or diversification within Springwell's emerging markets portfolio, or even making general comments as to the desirability of diversification of the portfolio outside that asset class (as exemplified in some of the passages quoted above), upon which Springwell relied in reaching its decisions, does not amount to an assumption of responsibility on the part of CIBL or CMIL, so as to bring into play the full range of obligations of an investment advisor, as contended for by Springwell. The function of a salesman giving advice, recommendations and information, and, in that sense, in providing a value-added service to clients, who will then make their own decisions as to whether and what to buy or sell, is entirely consistent with the role not only of an emerging markets bond salesman in the financial world, but, indeed, with that of any salesman in ordinary life. The case of Riggs AP Bank Ltd v Eurocopy (GB) Ltd (1998) Ch D (Hart J) 6 November 1998 (unreported) is an instructive example.
455. Springwell argued that, although in some cases, the capacity in which the advice was given might preclude a duty of care from coming into existence, here the extent of the reliance by AP on JA's advice, and the alleged lack of financial sophistication on the part of AP, both known to Chase, meant that nonetheless a duty of care arose. Thus Springwell's case was that AP was an unsophisticated and conservative investor, who was not, himself, in a position to evaluate the appropriateness of any investment, but who relied entirely on JA, without himself subjecting anything to critical scrutiny, to advise him what was appropriate; and further that JA, and others at Chase, were fully aware of this dependence.^[100] I reject this argument. I have already expressed my conclusions above as to the nature and extent of AP's reliance on JA's advice. I have also already expressed my conclusions above as to the sophistication of Springwell, as an investor. In my judgment, none of the alleged, or established, personal attributes of Springwell, or AP, as an investor, or the fact that Chase were making substantial profits out of Springwell's dealings with CMB and the Investment Bank would begin to justify a displacement of the capacity in which JA acted, so as to give rise to the alleged extensive duties of care, or, indeed, any more limited duty.
456. Accordingly, I conclude that the actual role discharged by JA, during the relevant period, did not give rise to any obligation, whether contractual or based on a common law duty of care, on the part of CIBL or CMIL, to advise Springwell in the extensive terms pleaded in the RADC. It is, perhaps, realistic to acknowledge that my conclusion on this point is probably coloured by the terms of the Relevant Provisions in the contractual documentation. But, attempting to look at the point in isolation from the effect of the contractual documentation, I conclude, nonetheless, that the fact that JA was giving advice in his capacity as a salesman did not give rise to the extensive duties of care, on the part of CIBL and CMIL, alleged by Springwell. On any basis, the capacity in which he was acting is, in my judgment a strong pointer against the assumption of any responsibility, or legal obligation, to give general investment advice.
457. Nor, for similar reasons, in my judgment, did the Private Bank, CMB, have the extensive obligations and responsibilities to advise, alleged by Springwell, simply by virtue of the fact that it provided Springwell with access to JA and the IFI sales department, or because CMB allegedly had some sort of responsibility for the activities of JA, and for the recommendations and advice which he was giving throughout the relevant period in his capacity as a salesman in the Investment Bank. I do not consider that, as a matter of law, CMB had legal responsibility for the conduct of JA, as an employee of CIBL or CMIL, who, as AP well knew, worked in the Investment Bank and separately from the Private Bank. However, even approaching the question on the wider hypothesis that CMB did have legal liability for the conduct of JA (on the basis that he should be regarded as part of the so-called Chase "Hellenic Team", or, as Mr. Brindle submitted, that the Private Bank and the Investment Bank should be regarded as operating as a joint enterprise in the provision of JA's services), for the reasons expressed above in relation to CIBL and CMIL, I conclude that no general investment advisory obligation was imposed on CMB, simply by reason of the fact that JA was making recommendations and giving advice throughout the relevant period in his capacity as a salesman.
458. I should emphasize that such conclusion relates to a different point from the question whether CMB itself, as the Private Bank, had a free-standing obligation to give general investment advice, or provide "wealth management" services, to Springwell, given CMB's role as a Private Bank, its actual conduct over the relevant period, and the circumstances with which it was faced, namely a client with an increasingly large exposure in emerging market debt securities, concentrated in Russia. I address this issue below.
459. Even if I were wrong in this conclusion, and the fact that JA was giving the recommendations and advice to Springwell, which I have described, would, taken on its own, prima facie have been sufficient to give rise to, or strongly suggest, an assumption of responsibility on the part of CIBL, CMIL, or even CMB, then, in my view, the Relevant Provisions in the contractual documentation precludes this result from occurring. I address this issue in later paragraphs of this judgment.

The actual role of the Private Bank, over the relevant period 1990-1998 and AP's reliance upon the Private Bank

460. I have set out in some detail, in the narrative section of the judgment, the evidence relating to the role and conduct of the Private Bank in the period 1990-1998. In my judgment, no free-standing obligation to advise (in the sense of an obligation that was separate from the activities of JA), whether in contract, or based on a common law duty of care arose by virtue of CMB's role as a Private Bank, its actual conduct over the relevant period, or the circumstances with which it was faced, namely a client with an increasingly large exposure in emerging market debt securities, concentrated in Russia, who was engaged in an extensive trading relationship with the Investment Bank. I come to that conclusion both in relation to Springwell's broad case that CMB had a duty to give general investment advice in the wide terms pleaded or to provide "wealth management" services, and also in relation to its case of more limited scope, namely that, in the circumstances with which it was faced in 1996-1998, it had a duty to give advice about the pressing need for diversification, whether within the emerging markets class, or more generally, across a wider asset class.
461. I have already rejected, in an earlier part of this judgment, Springwell's primary case that, at the time of the introduction of JA to Springwell, the Private Bank contractually agreed to provide general investment advisory services to Springwell, either by means of affording Springwell access to JA and the Investment Bank, or by means of CMB itself supervising the activities of the Investment Bank. I have also already rejected Springwell's case that the Shipping Department assumed any common law responsibility, or obligation, to advise Springwell, either arising out of the circumstances of JA's introduction to AP, or because of what occurred during the period until 1990, when Springwell's account was with the Shipping Department. I now have to consider the alternative way, or ways in which Springwell put, or developed, its case, namely that CMB assumed a responsibility to advise Springwell, because of what occurred during the period 1990 to 1998, and, in particular, in response to the change over time in the composition and size of Springwell's emerging markets portfolio, the fact that it became increasingly highly leveraged, and the ever-increasing concentration in Russian securities.
462. A serious flaw in Springwell's case under this head is that, despite Mr. Brindle's submissions to the contrary, it has never been clearly articulated, whether in the RADC or otherwise. Thus, for example, there was no clear identification of precisely what duties were owed at any particular time, or the specific date upon which it was alleged that CMB had assumed legal obligations to Springwell. The latter point was particularly important given that the shape of the portfolio had evolved over a number of years, with the first Russian investment having been made in 1996. This lack of clarity reflected the fact that Springwell's primary case has always been that the advisory relationship was provided by Chase (without regard to precisely which corporate entity, whether the Investment Bank (CIBL or CMIL) or the Private Bank and the Investment Bank acting in combination) acting through JA.
463. As with my conclusion in relation to the role of JA, my view on this point has necessarily been coloured by the terms of the Relevant Provisions in the contractual documentation. But, attempting to look at the point in isolation from the effect of the contractual documentation, I conclude, nonetheless, that no duty of care arose from the circumstances relating to the role of the Private Bank.
464. I conclude, on the evidence, that, in relation to the years 1994 to 1996, during which MF was head of the Hellenic Group, not only was no investment advisory service in fact being provided to Springwell by the Private Bank, but also that AP was well aware of this fact, and was not looking towards, or expecting, the Private Bank to do so. It is surprising, to say the least, if AP genuinely considered that Springwell was entitled to the benefit of an investment advisory service from the Private Bank, that he made no complaint to MF or FS about the absence of any such service, since AP was more than able to articulate any dissatisfaction with the services that were provided by Chase. Indeed, in September 1994, at the time when MF took over from EM, AP was vociferously expressing his dissatisfaction with the one advisory service that Chase was in fact providing, namely the discretionary IMA.
465. Springwell's complaint is that MF, in his evidence at trial, recognised, with hindsight, his failure to advise upon diversification and that this pointed to the recognition of a duty of care and the assumption of responsibility. I disagree. Had MF thought for a moment that the Private Bank had an existing and general advisory obligation to advise Springwell on diversification and asset allocation, I have little doubt that he would have taken steps to have put such a service in place, with the utilisation of appropriate modelling tools for portfolio management, such as benchmarks, risk profiles and asset allocation principles.
466. I likewise conclude, on the evidence, that, in relation to the years 1996 to 1998, during which SG was head of the Hellenic Group, not only was no investment advisory service in fact being provided to Springwell by the Private Bank, but also that AP was well aware of this fact, and was not looking towards, or expecting, the Private Bank to do so. As I have already mentioned, Mr. Brindle strongly relied on the proposals for diversification which SG made to AP after he took over as head of the Hellenic Group in 1996, which I have summarised in the earlier narrative section of this judgment, as demonstrating the recognition on the part of the Private Bank of an obligation to give general investment advice as to diversification and other matters. It was common ground, both on the pleadings, and on the evidence, that the Private Bank's diversification proposals were made by way of a marketing presentation, soliciting investments in specific products, but were not put forward by SG as part of a strategy of diversification or in order to bring about a restructuring of Springwell's portfolio.^[101]
467. My conclusion is that, on a full analysis of the evidence, there is nothing in these communications that could be characterised as an assumption by the Private Bank of the responsibility to give Springwell wide–ranging investment advice as to the structure of its portfolio, the need for diversification or asset allocation. The evidence clearly showed that, in the case of Springwell, as with many other Hellenic Group clients, there was a triangular relationship structure between the Shipping Group, the Private Bank and IFI, which had been operating for several years in order to meet the needs of the Group. Thus, as described by SG and others, the Private Bank managed both the one-obligor credit approval (if the Private Bank had the largest credit exposure), and the Private Bank's own credit exposure, through its credit process. It also managed the client relationship, and would introduce product specialists as needed. IFI, through JA (or another such product specialist) had primary responsibility for fulfilling the customers' requests for emerging markets paper, and the Shipping Department met their ship financing requirements. All three departments worked together. The diversification proposals made to Springwell in my judgment reflect that relationship operating in practice.
468. Nor, in my judgment, does the evidence show that AP thought, or had any reasonable basis to believe, that he could rely, or was entitled to be relying, upon the Private Bank to be giving him wide ranging investment advice, let alone that he was in fact placing any such reliance on the Private Bank. The reality was that Springwell had, of its own volition, with AP's increasing appetite for the substantial returns that investing in emerging markets afforded, adopted a strategy of concentration in emerging markets, and, in particular, in Russian debt instruments. AP was, throughout, pointedly dismissive of the diversification proposals of the Private Bank personnel. In my judgment, in those circumstances he cannot lay the responsibility, at the Private Bank's door, for his own decisions to continue to invest so substantially in risky markets, by asserting that the Private Bank had some free-standing, over-arching duty of care to speak out and advise him urgently to diversify a substantial amount of the Springwell portfolio.
469. The evidence from the experts in relation to private banking, at least to a limited extent, supported the proposition that the mere fact that one was a client of a private bank in the 1990s did not necessarily entitle one to the benefit of a full investment advisory service, in the absence of a contractual agreement and a fee structure for such a service. The evidence was of limited value, because both agreed that the determination of the question was ultimately a matter of fact. Their evidence may be summarised as follows:

i) both experts agreed that that there was no universal system or regime by which private banks operate. Thus they further agreed that, at least to some extent, their different viewpoints reflected their different experiences and working environments, and the nature of the institutions within which they worked.

ii) They also agreed that the conduct of private banks had changed significantly over time, and that, in the early 1990s, the whole sector was undeveloped in the UK; that many changes had been made since then, with a developing regulatory regime and stricter compliance requirements.

iii) Both experts were clear that, ultimately, the nature of the service provided by a private bank to a customer depended on the terms of the contract between the particular bank and the customer. Thus they agreed that the fact that a particular private bank might offer particular services did not mean either that every other private bank must do so, or that every client is automatically a recipient of such services. As Mr. Saunders explained, what are now seen as the "full range of services" was in fact offered by only a handful of private banks in the early 1990s. He made the point that the principal distinction was between a discretionary and a non-discretionary client. If a client wanted to maintain control over his assets (and therefore was a non-discretionary client), he could either be an "advisory" client, who received and paid for advice from the bank in relation to his investments, or a "non-advisory" client who did not.

iv) In any event they both expressed the view that, as for all banking services, if a client wishes to take the benefit, such services have to be contracted and paid for. Thus, they agreed that it did not follow that, because some private banks now routinely offer a "wealth management" service to those clients who agree to receive such services, therefore Chase must have acted as investment advisor to Springwell. Both experts were firm as to the prevalence in practice of a written contractual agreement.

v) So far as Mr. Saunders was concerned, the structural relationship which operated within Chase was a perfectly acceptable structure which fell within Mr. Saunders' own experience, albeit that, in his experience, it was relatively rare: namely an account at the private bank, for the provision of particular services, and a direct relationship with a product specialist at an affiliate investment bank. Mr. Saunders was in no doubt that there would be no private bank advisory content within such a structure, and that the role of the private bank would be, and was in his experience, solely that of custodian and banker. His evidence was that a private bank could never properly assume an advisory responsibility when it had no control over, or even knowledge of the particular trading between the client and the product specialist. Mr. Dicker did not have any experience of such a relationship in his bank, and took the view that such a relationship would give rise to general advisory obligations, but accepted that the difference in views of the experts on this aspect of this case was one which merely reflected their respective and different practices and experience.

vi) As Mr. Saunders explained from his own experience, if a client wished to trade in more exotic areas, such as foreign exchange or the emerging markets, then, as a matter of practice, the issue would arise as to whether he should be classified as a non-private customer. If so classified, he would be sent a non-private customer notification. The significance of such a notification, as Mr. Saunders understood it, was that it confirmed that the bank had no liability for advice as to suitability or any obligation to provide information, even if the relationship was otherwise an advisory one. His evidence confirmed that, in sending the DDCS letters to Springwell, Chase acted consistently with market practice as perceived and understood by Mr. Saunders.

470. Ultimately, because the question is one of fact, I did not find the evidence of the expert private bankers of very great assistance in relation to the issue of the existence of a duty of care, and I perceived no need to resolve the differences in approach between them. The evidence did, however, support the negative proposition that neither party's characterisation of the relationship was ruled out by market practice.
471. I have, in coming to my conclusion that no free-standing duty of care was owed by the Private Bank, taken into consideration the handful of internal Chase documents dated in 1994 and 1995 that referred to Chase or the Private Bank as "trusted financial advisor" and upon which so much time was spent in cross-examination. These documents did not pass between Chase and Springwell, nor did they reflect the terms of anything that was said at a meeting between Chase and Springwell, or of anything that otherwise passed between the parties. Nor, when viewed in their context, do they, in my judgment, reflect a recognition or acceptance by the Private Bank that it indeed owed investment advisory obligations to Springwell. (Still less could they be relied upon as a recognition of any investment advisory duty on the part of the Investment Bank, since the documents were not generated by JA or within the Investment Bank.) I agree with Mr. Hapgood's submission that the evidence showed that the term was used within the Private Bank for no real purpose other than as an internal marketing slogan for a short period of time. I do not consider that their mere existence can change the analysis of the Private Bank's relationship with Springwell, particularly when one takes into account, on the other side of the scale so far as internal documents are concerned, other internal Private Bank documents such as, for example, Chase's "Private Bank Credit Guide", "The Product Summary" in respect of LDC debt sales to customers of the London Private Bank, the EIQ, and the audit report on the Private Bank of May 1995. The first three of these emphasize that the eligibility requirements for trading in emerging markets debt instruments include the requirement that the client is not looking to Chase for investment advice, and an acknowledgement in the contractual documentation that such was the case. As I have already said, if that acknowledgement had not been given, I have no doubt that Springwell would not have been afforded access, or been allowed to have continued access, to the Investment Bank's emerging markets sales desk or to the various financing programmes. The audit report in relation to the Private Bank of May 1995 was a very detailed document which contained an extensive review of LDC sales activity to Private Bank customers. There is not a single mention at any point in the document of investment advice or the performance of any such role on Chase's part.
472. More importantly still, the few internal Chase documents which referred to Chase or the Private Bank as "trusted financial advisor" are wholly inconsistent with the terms of the formal contractual documentation, which were unambiguous about the absence of advice or of any reliance by the customer on such advice. In Bankers Trust v PT Dharmala Sakti ^[102] Mance J dismissed the views of even the alleged advisor as of "relatively minor significance", attaching much more significance to the bank's actual statement of its role at the time, through a non-private customer letter, the terms of which militated against the wide duties alleged. I likewise adopt that approach.
473. Accordingly, in my conclusion, no free-standing obligation to advise arose by virtue of CMB's role as a Private Bank, its actual conduct over the relevant period, or the circumstances with which it was faced, namely a client with an increasingly large exposure in emerging market debt securities, concentrated in Russia, who was engaged in an extensive (and so far as Chase was concerned, highly profitable) trading relationship with the Investment Bank.

The terms of the relevant contractual documents and disclaimers: their general effect

474. It was common ground that, in determining whether the circumstances are such as to impose a duty of care, an important factor is the way in which the parties have sought to regulate their relationships, and to allocate risk, by contract. If the parties have contractually defined the terms upon which they will conduct business, then that may in the normal case provide a clear and often determinative indication as to the non-existence of any wider tortious duty. In Henderson v Merrett Lord Browne-Wilkinson said.

"The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise.

In my judgment, this traditional approach of equity to fiduciary duties is instructive when considering the relationship between a contract and any duty of care arising under the Hedley Byrne principle (of which fiduciary duties of care are merely an example). The existence of an underlying contract (e.g.. as between solicitor and client) does not automatically exclude the general duty of care which the law imposes on those who voluntarily assume to act for others. But the nature and terms of the contractual relationship between the parties will be determinative of the scope of the responsibility assumed and can, in some cases, exclude any assumption of legal responsibility to the plaintiff for whom the defendant has assumed to act.

….

I can see no good reason for holding that the existence of a contractual right is in all circumstances inconsistent with another tortious right, provided that it is understood that the agreement of the parties evidenced by the contract can modify and shape the tortious duties which, in the absence of contract, would be applicable."^[103]

475. In my judgment the various terms of the principal contractual documents upon which Chase relies (i.e. the Relevant Provisions), and which I have set out above^[104], clearly show that Springwell and Chase were dealing with each other on a stipulated and accepted basis that, whatever advice or recommendations may have been given by Chase in the course of their trading relationship (i.e. the sale by CIBL/CMIL to Springwell of emerging markets securities, and the financing by CMB of various of Springwell's purchases), no obligations to give appropriate investment advice, or duties of care as an investment advisor, were being assumed by either the Private Bank, CMB, or the Investment Bank, as the entity actually selling Springwell the relevant securities, (i.e. CIBL or CMIL), whether in relation to Springwell's emerging markets portfolio or, more generally, as to what Springwell should do, given the existence of that portfolio. Thus I accept the submissions made on behalf of Chase that the contractual documentation, whether taken at a straightforward contractual level, or looked at more widely, as an indication as to whether any common law duties of care arose, showed that the parties specifically contracted upon the basis of a trading and banking relationship which negated any possibility of a general or specific advisory duty coming into existence.
476. I also accept Chase's submission that such documentation was of a very broad nature and governed the entirety of the dealings between the parties, either on the terms of individual documents (such as the DDCS letters) or by describing and evidencing a course of dealing between the parties. Some of the documents (for example the DDCS letters) governed the nature of the relationship as a whole. Others (such as the individual confirms) governed specific transactions, but also evidenced a consistent course of dealing throughout.
477. As can be seen from the relevant terms of the contractual documents which I have cited above, the provisions fell broadly into three categories:

i) provisions setting out the terms and conditions of business between Chase and Springwell, either generally or by reference to specific transactions; see, for example, paragraph 2, paragraph 4, and paragraph 6 of the 1997 DDCS letter;

ii) representations or acknowledgments as to sophistication and non-reliance; see, for example, the second sentence of paragraph 4 of the 1997 DDCS letter and section 6(b) of the MFA;

iii) conventional exclusion clauses; see, for example, the penultimate sentence of paragraph 4 of the 1997 DDCS letter.

478. I also accept Chase's primary submission that it is not necessary, at least for the purposes of the general advisory claim, to undertake a detailed textual analysis of the precise ambit, extent and legal effect of each individual clause because the contractual documentation, taken as a whole, has the broader evidential significance of negating the assumption of any general advisory duty or obligation on the part of Chase. Thus I accept that the contractual documentation presented a consistent, and commercially coherent picture; namely that Springwell's trading through the Investment Bank, whether in emerging markets instruments or otherwise, was not intended to give rise to, or impose upon the Private Bank or the Investment Bank, investment advisory obligations or responsibilities, either in relation to the particular securities purchased or sold, or more generally, in relation to Springwell's financial position in the light of its emerging markets portfolio; in other words, that the relationship between Springwell and the Private Bank, and between Springwell and the Investment Bank, was one where neither the Private Bank nor the Investment Bank had an obligation to give any investment advice, and, moreover, was one where, even if any such advice was given, Springwell acknowledged that the Chase entities had no responsibility for any such advice, (a) because Springwell acknowledged that it had not relied upon any such advice in making its investment decision, and (b) because it had agreed that the Chase entities were not liable for any loss caused as a result of any investment decision by Springwell (save in the case of gross negligence or wilful default.)
479. For reasons which I have already given, not least because advice, in the loose sense, was being given by JA, I prefer to define the relationship as one in which Chase was not undertaking any general investment advisory responsibility, or obligation, rather than, as Mr. Hapgood sought to do, by reference to a "non-advisory relationship", but this is perhaps merely a matter of semantics. I agree with him that, on every occasion on which the parties came to document their contractual relations, and for whatever purposes, they agreed that Chase was not required to give any advice, was not to assume investment advisory obligations or responsibilities, and that Springwell acknowledged that it was relying on its own judgment in entering into the transaction. The documentation extends over a lengthy period of time, all of which was to the same effect, and is, in my judgment, inconsistent with the alleged, or any, advisory duties of care, of whatever scope. As Springwell itself pleaded in its Further Information:

"… the paragraphs [in the DDCS letters] purported to treat Springwell as a sophisticated investor, with a non-advisory relationship in respect of whom there was no duty to advise or to ensure that investments were suitable and to exclude liability in respect of information provided to Springwell."

In my judgment, those paragraphs not merely purported to achieve that effect, but succeeded in so doing.

480. A recent example of the approach that contractual documentation can define the relationship between the parties, so as to exclude any parallel or free-standing common law duties of care, is the recent case of IFE Fund v Goldman Sachs International, a decision of Toulson J^[105] (as he then was) upheld by the Court of Appeal.^[106] In that case, there were various claims in misrepresentation in relation to an Information Memorandum (a SIM) provided by the defendant to the claimant. There was also a claim in respect of an alleged general duty of care to give advice. This was notwithstanding the fact that the Information Memorandum had contained clauses to the effect that its content had not been independently verified and that the defendant accepted no responsibility in respect of it.^[107] One of the issues between the parties was whether or not the particular clauses in the Information Memorandum should be characterised as exclusion clauses and therefore subject to potential challenge under the Unfair Contract Terms Act 1977 (Springwell pursues a similar argument in the present case, which I consider below). Toulson J rejected the notion that they were exclusion clauses and saw them as defining the nature of the relationship between the parties, with the result that there was simply no question of any general advisory duty. As he said:

"The relevant paragraphs of the SIM are not in my view to be characterised in substance as a notice excluding or restricting a liability for negligence, but more fundamentally as going to the issue whether there was a relationship between the parties (amounting to or equivalent to that of professional advisor and advisee) such as to make it just and reasonable to impose the alleged duty of care".^[108]

481. This approach was endorsed and followed by the Court of Appeal. Waller LJ, whose judgment was agreed by the other two judges, said:

"I can start by clearing one or two issues out of the way. First it seems to me that the argument that there was some free standing duty of care owed by GSI to IFE in this case is in the light of the terms of the Important Notice hopeless. Nothing could be clearer than that GSI were not assuming any responsibility to the participants: Hedley Byrne v Heller & Partners [1964] AC 465. The foundation for liability for negligent misstatements demonstrates that where the terms on which someone is prepared to give advice or make a statement negatives any assumption of responsibility, no duty of care will be owed. Although there might be cases where the law would impose a duty by virtue of a particular state of facts despite an attempt not 'to assume responsibility' the relationship between GSI either as arranger or as vendor would not be one of them. I entirely agree with the judge on this aspect".^[109]

482. The manner in which this passage is expressed endorses the fundamental importance of the contractual matrix in determining the existence and scope of any duty of care. There are a number of other cases which strongly support the approach that contractual provisions such as those found in the present case prevent the coming into existence of any general duty of care to advise. One of these is Peekay Intermark v Australia & New Zealand Banking Group^[110]. This case related to a GKO-linked Note issued by the defendant bank. In summary, the second claimant had invested in emerging market instruments with the defendant bank since 1997; the first claimant, Peekay, was the second claimant's investment vehicle. The salesman telephoned the second claimant to see if the first claimant wished to purchase the note. She described the nature of the investment to him in terms which suggested that the note was structured in such a way that it gave the investor a proprietary interest in the underlying GKO. Nor did she explain to the second claimant that, in the event of a default, investors would have no control over the manner in which the investment was liquidated. The contractual documentation sent to the customer stated the correct position, but the second claimant did not read it before he signed and returned it. The claim, in misrepresentation, succeeded before the judge, but the judgment was overturned in the Court of Appeal. I shall return to the detail of the judgment in another context, but it is important to note that the focus of the judgments in the Court of Appeal was of the need for commercial certainty between parties in commercial transactions such as this, and of the significance of the contractual documentation. As was said by Moore-Bick LJ^[111]:

"One of the factors that distinguishes the present case from those to which I have referred so far is that the true position appeared clearly from the terms of the very contract which the second claimant says it was induced to enter into by the misrepresentation. Moreover, it was not buried in a mass of small print but appeared on the face of the documents as part of the description of the investment product to which the contract related. It was accepted that a person who signs a document knowing that it is intended to have legal effect is generally bound by its terms, whether he has actually read them or not. The classic example of this is to be found in L'Estrange v Graucob [1934] 2 KB 394. It is an important principle of English law which underpins the whole of commercial life; any erosion of it would have serious repercussions far beyond the business community."

The Court held that by confirming that he had read and understood the Risk Disclosure Statement and returning it with his instructions to make the investment, the second claimant offered to enter into a contract with the defendant on behalf of Peekay on those terms and that offer was accepted by the defendant when it implemented his instructions. As a result it was part of the contract between them that Peekay was aware of the nature of the investment it was seeking to purchase and had satisfied itself that it was suitable for its needs. In those circumstances, since it had not been suggested that the defendant misrepresented to the second claimant the effect of the documents, it was not open to Peekay to say that it did not understand the nature of the transaction described in the terms and conditions. Accordingly, Peekay could not assert that it was induced to enter into the contract by a misunderstanding of the nature of the investment derived from what the salesman had said about the product some days earlier.

483. Another important case on which Mr. Hapgood relied is Valse Holdings v Merrill Lynch International Bank.^[112] In Valse, a claim for negligent advice was made by a Panamanian personal investment company. The company had retained the defendant bank as its banker and as its financial advisor: it was common ground that the bank had by contract been engaged as financial advisor, on terms set out in a copy of its standard terms and conditions, and that the account was advisory, rather than discretionary management, which meant that the bank advised on investments but was not authorised to trade without express instructions. The employee of the bank whose advice was being criticised was a general investment advisor, not a salesman, nor a specialist in emerging markets. However, albeit that the bank was the claimant's financial advisor, the terms and conditions also included the equivalent of a SFA non-private customer notification (whether that was strictly necessary or not), which confirmed that the customer had been categorised as a non-private customer, and the regulatory obligations to advise on suitability or to give risk warnings were being excluded.
484. The claimants' broad case was for negligent advice as to the content of the portfolio, similar to the complaints made by Springwell in the present case. The claim, as summarised by Morison J was "that the portfolio as a whole was far too risky and [the claimant] should have been advised of that".^[113] Again in terms reminiscent of Springwell's position, the claimant's argument was that the terms and conditions may have excluded any regulatory obligation, but said nothing about the common law obligations, for instance to monitor and advise with regard to investment objectives.^[114]
485. The judge rejected the claim, and upheld the argument of the defendant bank that the non-private customer notification necessarily narrowed the scope of any common law duty. Thus, he held that even in the context of an acknowledged advisory relationship, there was in the circumstances no general obligation to advise as to suitability or to give sufficient risk warnings, because those obligations were not part of the agreed terms of business. As summarised by the judge:

"Where, as here, the client is designated an expert, and this designation as such has not been challenged, then the technical position as regards the FSA Rules is as set out in Mr Hapgood QC's submissions (recited above). The Bank does not take responsibility for the suitability of the advice they give. There was no Non-Discretionary Management Agreement in existence and no contractual duty, in my view, owed to Valse, the client, as to the suitability of the portfolio as a whole. The bank is, essentially, under an obligation to carry out the client's instructions and may not refuse to do so simply on the grounds that the instructions may conflict with an agreed investment objective. The client is the master of the account; the investment objectives are his servant and must be adapted to meet the client's trading decisions. The advisor must recommend investments which do not appear to him to conflict with the client's investment objectives, but the client takes responsibility for accepting or rejecting any advice which is tendered to him." ^[115]

486. In my judgment, the present case is a fortiori the position in Valse, where there was no contractual agreement that Chase, whether through the Private Bank, or the Investment Bank, should provide an advisory management service.
487. Another case, Bankers Trust International PLC v PT Dharmala Sakti Sejahtera^[116] concerned two swap transactions entered into between Bankers Trust and an Indonesian company. Bankers Trust sued on the transactions. The defendant raised, inter alia, allegations of misrepresentation and breach of a general duty of care in relation to the transactions. In relation to the latter contentions, the Court was concerned whether the circumstances were such as to give rise to a general duty of care to advise. Mance J found on the facts that they were not.
488. Although the facts differed from the present case, the analysis of the judge, particularly in relation to the second swap, is instructive.^[117] The defendant had sought to establish an advisory duty by relying on: (a) the actual representations which were made; (b) the skill and knowledge of Bankers Trust, when compared to that of the defendants; (c) the particular circumstances of the presentations made by Bankers Trust; and (d) the views of the Bankers Trust officer as to his role and responsibilities. Dealing with each in turn, the judge held that:

i) The specific representation made would or would not attract their own consequences (i.e. in terms of a claim in misrepresentation). By themselves, they did not support a general duty of care. Earlier in his judgment, at page 533, he had emphasised the distinction between a claim in misrepresentation and an allegation of a duty of care in the following terms:

"(c) Duty of care

The question whether one contracting party owes the other any, and if so what duty of care once again requires consideration of all the circumstances. Here too, as Esso Petroleum Co Ltd. v Mardon demonstrates, the same factors that are relevant in determining whether there has been a simple. representation or a collateral undertaking must evaluated. In that case, the court had little difficulty in concluding that Esso Petroleum Co Ltd had undertaken a duty of care when it communicated the crucial estimate in the course of pre-contractual negotiations.

I have mentioned that the existence of a duty of care does not depend upon the existence of any misreprescntation justifying rescission, and that the duty alleged by DSS extends to explaining fully and properly to DSS the operation, terms, meaning and effect of the proposed swaps and the risks and financial consequences of accepting them. The allegations go wider than those of misrepresentation and collateral undertaking. The principle, on which DSS founds itself here is contained in cases such as Barclays Bank plc v Khaira [1992] 1 WLR 623, Cornish v Midland Bank plc [1989] 3 All ER 513 and Box v Midland Bank Ltd [1979] 12 LI Rep 391. In short, a bank negotiating and contracting with another party owes in the first instance no duty to explain the nature or effect of the proposed arrangement to that other party. However, if the bank does give an explanation or tender advice, then it owes a duty to give that explanation or tender that advice fully, accurately and properly. How far that duty goes must once again depend on the precise nature of the circumstances and of the explanation or advice which is tendered. [Counsel for the claimants] accepted: that BTCo and BTI did in the present case owe a duty to take reasonable care not to misstate facts in any of the relevant meetings or letters. DSS alleges that explanations and advice were tendered which went beyond the mere statement of facts, and that BTCo and BTI owed correspondingly broader duties.

ii) The parties' respective skill and knowledge was very relevant though not decisive. On the facts, Bankers Trust had a deeper expertise, but the defendants had, and held themselves out as having, sufficient expertise to understand the basic elements of what were very complex transactions.

iii) The judge did not consider the circumstances of the presentations sufficient to give rise to a duty of care. Further, the judge also acknowledged that, where both parties are pursuing their respective financial interests in a commercial transaction, advisory obligations will not normally arise:

"The relationship was essentially commercial. DSS knew that [Bankers Trust] was soliciting DSS's custom for [Bankers Trust's] products and for [Banker's Trust's] own profit. The court should not be too ready to read duties of an advisory nature into this type of relationship." ^[118]

iv) The views in evidence of the Bankers Trust officer were of minor significance. Mance J, however, placed more significance on "[Bankers Trusts'] actual statement at the time of its role" in a letter which it sent containing a non-private customer notification. Although not of contractual effect, the judge described the evidential significance of the effect of this as follows:

"Although written to emphasise the inapplicability of the protection afforded to private customers by the rules of the Securities and Futures Authority the letter is written in terms which militate against the wide implied duties to investigate, inform, advise and warn suggested by DSS in this action".^[119]

489. The recent English case law, including Bankers Trust and Peekay, is considered by Philip Wood in his recent "Regulation of International Finance".^[120] His conclusion emphasises the reluctance of the English courts to impose a general advisory duty of the type asserted by Springwell in the present case:

"The above cases tend to show that where an investor loses on the investment, in the sophisticated investor context it will be hard for the investor to claim compensation from the seller of the investment. The message delivered by the courts is that effectively, if a buyer of a product does not understand the product, it should obtain proper advice and pay for it."

490. However Mr. Brindle submitted that these authorities were of no assistance, because of the particular circumstances surrounding Springwell's signing of the documents; he submitted that the present case was one of those where, as envisaged in IFE v Goldman Sachs, the law would impose a duty by virtue of a particular state of facts despite an attempt not to assume responsibility. I turn now to deal with these arguments.

Springwell's arguments seeking to avoid the terms of the relevant contractual documents and disclaimers

491. In its pleadings and submissions, Springwell mounted an extensive attack upon Chase's asserted entitlement to rely upon the contractual documentation as negating a duty of care and sought to circumvent the effect of the contractual documentation, which it signed or which it received.^[121]. That attack was based not merely on the wider grounds of the various equitable and other defences, which Springwell invoked to avoid the effect of the Relevant Provisions, but was also based upon specific arguments as to the alleged narrow construction and limited extent of the relevant terms and representations. In broad terms, these arguments took three forms: i) attempts to place a narrow construction on the Relevant Provisions; ii) attempts to undermine terms which take the form of representations; and iii) attempts to avoid the documents altogether, through various equitable and other defences. All these arguments were, to a certain extent, related
492. Before dealing with Springwell's construction and avoidance arguments, it is, as Mr. Hapgood submitted, instructive to identify certain general features against the backdrop of which Springwell's attempts to circumvent the contractual documentation fall to be considered. First, the contractual documents were written contractual agreements, concluded between commercial parties which I find were of equal bargaining power. The Polemises were not parties at a disadvantage. On the contrary, they were highly experienced and astute businessmen who were well versed in concluding commercial contracts and who were fully capable (if they bothered to read the relevant terms) of understanding both the significance of agreeing contractual terms and the meaning and effect of the terms which they agreed. If they required legal advice, they were fully capable of taking it. They did not need to deal with Chase. They had access (which, on occasions, they utilised) to other financial institutions, from which they could have purchased similar products to those sold to them by Chase, if they had not been prepared to accept the terms or the prices which Chase was offering. Second, the case put forward by Springwell is not a case of a single supposed mistake, affecting one, or a small number of, documents. Springwell's case in effect involves scrapping terms contained in numerous documents, including the confirms, all of which presented a consistent pattern of non-acceptance on the part of Chase of legal responsibility for any advice that might have been given. Most of the documents were signed on behalf of Springwell by way of acceptance of their terms in the knowledge that the documents were contractual documents. Third, the contractual documents were not exceptional or unusual. They were, for the main part, ordinary standard form documents of the sort which might be expected to pass between a bank and its customer in this area of activity. Some of them were industry standard documents (such as the GMRA). Most of them were no longer than a few pages in size, with clear terms. Fourth, as I have already held above, the contractual documents were significant documents from Chase's perspective, because they confirmed the basis upon which Chase was prepared to trade with Springwell. Thus absent, for example, the DDCS letters, there would have been no trading at all. Fifth, Springwell and the Polemises were not unfamiliar with this sort of contractual documentation. It mirrored contractual documentation which Springwell or the Polemises had signed with other banks. Thus, for example, Springwell had signed non-private customer letters and a GMRA with ML before it signed the 1997 DDCS letter and the Chase GMRA. Sixth, this is not a case in which Springwell seeks to avoid documents on the basis of some active misrepresentation about their contents. Its avoidance arguments are effectively premised on Chase's alleged failure to point something out to Springwell, in circumstances where it is alleged there was an anterior duty to do so.
493. Against that background, I turn to consider the various arguments raised by Springwell to circumvent certain terms of the contractual documents.

The terms of the relevant contractual documents and disclaimers: the construction of particular clauses

494. It was common ground between the parties that the normal, well-known rules of construction applied. Thus, the object of the court construing the contractual documentation is to discover the intention of the parties from the words used; this, in turn, is to be derived by ascertaining the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to both parties in the situation in which they were at the time of the contract.^[122] Further, commercial documents must be construed in a business-like fashion, and there must be ascribed to the words a meaning that would make good commercial sense.^[123] Chase, by Mr. Hapgood, accepted that, in the case of an exemption clause, construction may be made contra proferentem, but submitted that, nevertheless, the need to so in appropriate circumstances did not detract from the overall approach to construction summarised above. Further, he submitted, in any event, very few of the terms of the contractual documents were, on analysis, exemption clauses.
495. In order to do justice to Springwell's construction arguments, it is thus necessary for me to consider the particular contractual ambit of certain individual clauses and individual contractual documents. However, having performed such analysis, I nonetheless reach the same conclusion as I have already expressed above, when considering the general effect of the Relevant Provisions on a composite basis.
496. The particular arguments of construction raised by Springwell related to the following documents: the MFA, the 1993 and 1997 DDCS Letters, the GMRA and the GKO-Linked Notes documentation.

Specific construction points on the MFA

497. Springwell contends that the MFA was entered into between CIBL and Springwell and that it related solely to the forward sale contracts to be entered into between Springwell and CIBL; thus its terms could only avail CIBL, and only in respect of transactions between CIBL and Springwell;^[124] that it did not seek to address unleveraged transactions (of which there continued to be a number between Springwell and CIBL and, after April 1996, between Springwell and CMIL); that CIBL was the only Chase entity party to the MFA and that, accordingly, its provisions cannot affect the claims against CMB, CMIL or CMSCI; further, since the MFA ceased to be used after 1 October 1997, and, from that date, leverage was provided pursuant to the GMRA, of all the assets in respect of which Springwell claims, only 8 transactions out of 67 were pursuant to the MFA.
498. As a matter of contract, the MFA, and the various confirms, govern each purchase of an instrument made under the MFA, and all and any claims made in respect thereof. However my primary conclusion, as already set out above, is that the MFA and the MFA confirms (like the other contractual documentation) reflect the broader relationship between the parties, and thus their evidential relevance is not just to the particular contracts entered into thereunder. Rather they support the position that none of the Chase entities were assuming any investment advisory responsibility.
499. In relation to the eight transactions the subject of Springwell's claim, which were effected pursuant to the MFA, I do not accept Springwell's argument that CMB cannot rely on the provisions in the MFA to deny the existence of any obligation or duty of care to advise Springwell in the wide terms pleaded. It is correct that that contract was with CIBL, as it was CIBL which sold the instruments on forward sale. However the relevant representations, warranties and acknowledgments by Springwell contained in Section 6(b) of the MFA specifically provided that Springwell acknowledged that it had :

"(i) … made, independently and without reliance on CIBL or any subsidiary or affiliate of CIBL, its own decision to acquire the Specified Instruments for such Transaction and does not expect CIBL or any such entity to be responsible for advising it as to the investment merits of any Transaction, …" (emphasis supplied)

as well as representing that Springwell was a "sophisticated investor fully familiar with debt obligations" of the relevant sort. Even though CMB (i.e. the Private Bank) was not a party to the contract, given the close commercial connection in the relevant context between CMB and CIBL (and, indeed, as I have described, one strand of Springwell's case was that the Private Bank was discharging its advisory role through CIBL and JA, an employee of CIBL), there is no reason in law why CMB should not be entitled to point to the relevant clause as evidence to negate the coming into existence of any obligation upon its part to advise in relation to the relevant transactions. I was not referred to any authority to the contrary in this context.

500. Thus, even if, contrary to my primary conclusion, the provisions of the MFA are only relevant to the 8 specific transactions identified above, in my judgment they are sufficient to preclude the coming into existence of any duty of care or obligation to advise on the part of CMB and/or CIBL in relation to those transactions or the consequences of them, so far as Springwell's wider financial position was concerned.
501. Springwell took a further point of construction in its opening submissions, in relation to the MFA confirms. It there contends that, because the transactions with CIBL were not transactions where "charges" were made, the relevant clause in the Confirm as quoted above "therefore does not bite". I do not accept this argument. The statement and confirmation that no advice had been given by CIBL applies irrespective of whether a charge is in fact made.

Specific construction points on the 1993 and 1997 DDCS letters

502. Springwell takes a series of points of construction in relation to the DDCS letters.^[125]
503. Before dealing with these points, I repeat my finding that these standard form letters, produced within the Chase compliance department, were highly significant letters, which were intended to reflect both the classification of clients as non-private customers, as a non-private customer for all emerging markets dealings, and, following on from that classification, the understanding and agreement of the parties that, neither the Private Bank, nor the Investment Bank had any obligation to give investment advice, either generally or in relation to any specific investments, or to consider the client's particular financial circumstances or investment objectives. They also contained the representation by the client that he had independently, and without reliance on the Chase entities, made his decision to acquire the relevant investments, and the exclusion of any liability on the part of the Chase for loss by the client. This was confirmed by the evidence of Mr. Saunders, who said that, in the market at the time, the purpose and effect of a non-private customer letter was to confirm the absence of any advisory responsibility in the areas covered by the notice. I also conclude that they were contractual documents setting out the terms and conditions on the basis of which the Private Bank and the Investment Bank were prepared to deal with Springwell.
504. First, Springwell submitted that the 1993 letter could avail CMB and CIBL only and the 1997 letter could avail CMB and CMIL only, since although CIBL is a party to the later letter, it did not transact any dealings for Springwell thereunder.^[126] In contractual terms this may be correct, but the point goes nowhere, as, in relation to the relevant transactions, no other party needs to rely on the letters. Moreover, as I have already held, the evidential significance of the letters goes much wider than their mere contractual effect, because they provide an evidential basis to negate the coming into existence of any common law duty of care (and this point applies to all of the construction arguments considered below).
505. Second, Springwell submitted that, on the construction of the introductory words of the Letters, the Letters have limited application both in relation to CMB and to CIBL/CMIL.^[127] Springwell's arguments under this head were as follows:

i) the introductory words of the Letters^[128] state:

"We [CMB] refer to our recent discussions when you informed us that you wished us to effect an introduction to the capital markets desk of [CIBL], with a view to you dealing for your own account in various debt and equity securities of public and private sector issuers located in developing countries ('Instruments'). We are pleased to arrange such an introduction on the basis that the following conditions apply, both to our activity in arranging the introduction and the activity of CIBL when dealing for you in such instruments …. The conditions referred to above are: …".

ii) So far as CMB was concerned, it was then submitted that the effect of those introductory words was to limit the applicability of the terms of both DDCS Letters to any forthcoming introduction by CMB of Springwell to CIBL, and to any transactions following such introduction. No such introduction happened because Springwell had already been introduced by CMB to CIBL over 5 years before the date of the 1993 Letter. That, Springwell submits, is important because it means that the DDCS Letters have no bearing on the general advisory obligations which CMB had already assumed, or which the Investment Bank had already assumed.

iii) In the alternative, Springwell submitted, that even if, contrary to the above, the application of the DDCS Letters as regards CMB was not limited to a future introduction, the most it could ever have covered would have been Springwell's dealings in "Instruments" (as defined in the Letter). Thus it is said that the DDCS Letters could not have limited or excluded the Private Bank's responsibility to consider the appropriate mix of asset classes in Springwell's portfolio and to advise on diversification accordingly.

iv) In relation to CIBL/CMIL, Springwell submitted that, on their true construction, the DDCS Letters only applied in respect of subsequent transactions in which CIBL/CMIL was "dealing for" Springwell, whereas in fact the Investment Bank only "dealt with" Springwell (i.e. as principal). Thus Mr. Brindle argued that the DDCS Letters expressly, in paragraph 5, recognised a distinction between "dealing for" someone and "dealing with" them and that the distinction between dealing for and dealing with is also recognised in a number of the SFA rules. He submitted that "dealing for" someone encompasses dealing as their agent, viz. buying and selling on their behalf; "Dealing with" someone encompasses dealing as principal, viz. buying and selling to them; thus the effect of the introductory words of the DDCS Letters ("when dealing for you") was clearly to limit the Letter's scope to any "activity of CIBL when dealing for" the client. Once it was appreciated that the DDCS Letters are addressing "the activity of CIBL/CMIL when dealing for" the client as agent, a number of its provisions especially in Paragraphs 2, 4, 5 and 7 make ready sense. He submitted that, in contrast, the factual position was that, throughout its dealings with Springwell, CIBL/CMIL dealt with Springwell as principal, but not for it. He referred to Chase's pleadings and JA's evidence to point out that Springwell's transactions were always with a Chase entity; thus Springwell was not buying from third parties and Chase was not playing a brokerage role for Springwell. Accordingly, it followed that the standard form wording of the DDCS Letters did not address dealings of the sort which Springwell had with CIBL/CMIL and the Letters were inapplicable. He submitted that there was no warrant for any generous construction in Chase's favour, as the language of the Letters was clear. They were standard form letters which would have been applicable to those customers for whom CIBL/CMIL dealt as agent and there must have been some such customers because of the language in Paragraph 4 (referring to placing orders), in Paragraph 5(d) (referring to other firms with whom client orders are placed) and Paragraph 7(a) (referring to "transactions effected on your behalf"). Thus the Letters were not applicable to Springwell's dealings with CIBL/CMIL.

v) In the alternative, in relation to CIBL/CMIL, Mr. Brindle submitted that even if, contrary to his previous argument, CIBL/CMIL did "deal for" Springwell, the protection afforded by the Letters did not cover Springwell's claims. That was because Springwell's claims did not arise out of any activity by CIBL/CMIL in dealing for Springwell, but rather out of another activity, namely an advisory activity. Mr. Brindle submitted that dealing and advising were different activities, which was a point specifically recognised in the drafting of the FSA 1986. In defining the activities which constitute "investment business", Schedule 1 to the FSA 1986 expressly distinguished between, on the one hand, "dealing" (see paragraph 12) and, on the other, "investment advice" (see paragraph 15 of the Schedule) He submitted that distinction was pertinent to the contents of the DDCS Letters because: (i) the Letter purported to be a regulatory document – notification to Springwell that it was to be treated as a Non-Private Customer; (ii) the Letter was headed "Dealings in Developing Countries Securities" emphasising that its concern was with "dealing"; and (iii) the service which the Letter envisaged CIBL/CMIL providing to the would-be client was a non-advisory, execution-only dealing service. However Springwell's claims arose out of advice or failure to advise; further, the claims were concerned not merely with advice directly related to particular transactions or "dealings"; the claims were also concerned with advice, or a lack of it, relating to portfolio strategy and structure, to the balance of risk in Springwell's portfolio as a whole and to an appropriate mix of investments between asset classes; the language of the Letters was simply inapt to cover such activities.

506. I reject these construction arguments based upon the introductory provisions. They reflect an unrealistic approach to the construction of a commercial document. My reasons are as follows:

i) The commercial context in which the letters have to be construed, is that Springwell had been introduced to JA (then at the money market desk) in 1987 or 1988, and shortly afterwards started dealing directly with him. The DDCS Letters were introduced as one of the requirements for affording clients access to the MFA programme. No reasonable reader of the 1992 or 1993 Letters, in the position of Springwell, would think that there had to be any further introduction by CMB to CIBL for the terms to apply to future dealings. Such a reader would correctly assume that the terms applied from the date of the Letter, irrespective of any future introduction.

ii) The letters, drafted in standard form, refer to an introduction by CMB of Springwell to CIBL/CMIL. They do not in terms refer to a future introduction. Nor do they suggest in any way that the letters should apply only in relation to investments purchased following such a future introduction.

iii) The purpose of the 1997 DDCS Letter was to reflect the fact that CMIL was taking over CIBL's business following the merger with Chemical Bank. Thus there was, at least in one sense, an introduction by CMB of Springwell to CMIL, since Springwell was for the first time being given access to trade through CMIL.

iv) Accordingly I reject the assertion that the Letters did not apply because Springwell had already been introduced to JA in 1987/1988.

507. I also reject the submission that the letters only applied to a situation where CIBL/CMIL were dealing, as agent, for and on behalf of Springwell, and did not apply to a situation where they were dealing as principal "with" Springwell. Shortly stated my reasons are:

i) Neither the commercial context, nor the language used, either in the introductory words, or in the rest of the Letters, justifies construing the phrase "the activity of CIBL when dealing for you in such instruments", where they appear in the introductory words, as restricted to a transaction where the Investment Bank was acting in a formal agency role, and excluding the situation where the Investment Bank sold or bought as principal. An investment bank, engaged, as JA was, in the activity of selling emerging markets debt instruments to Springwell, can, in normal language, be said to dealing for its customer generally in receiving orders, acquiring investments in order to sell to the customer and selling investments on to the customer, notwithstanding that the actual sale is principal to principal. Indeed JA himself described the role of salesman as "really a broking role".

ii) The context of the Letters, as would be obvious to the reasonable reader in Springwell's position, shows that the letter is not concerned with agency arrangements but with the role of an investment bank in selling instruments to the customer. That is reflected in almost every single clause in the letter. Thus, by way of example:

a) Clause 1: refers to "the frequency and size of your dealings in instruments".

b) Clause 2: refers to disclosure statements, advice, "an order placed on a "best execution" basis".

c) Clause 4: refers to investment advice "in relation to specific investments" and "placing an order" with CMB or CIBL.

d) Clause 5 refers in terms to where CMB or CIBL/CMIL "deals with or for you" showing that there is no magic or necessary restriction in the words used. They are interchangeable in the context of the letter. Springwell's submission that paragraph 5 of the letters "expressly recognises a distinction between" dealing for and dealing with, is wrong on the basis of its own logic. Were Springwell's construction of "dealing for" to be correct, then the letter would have made no mention of "dealing with" in paragraph 5, because (as is Springwell's logic), the letter had nothing whatsoever to do with "dealing with".

e) Clause 9 refers to "your decision to purchase or sell any instrument".

iii) Springwell's suggested construction is commercially unreal. If the Letters were not intended to cover the transactions in which Chase and Springwell did in fact engage, and had engaged for several years, what relationship were they supposed to cover? There is no suggestion anywhere that it was ever contemplated that Chase would enter some formal principal/agency relationship with Springwell. In the light of the commercial matrix, on no objective reading of the letters could any reasonable party have considered that their terms were intended to cover not the type of transactions with which Chase and Springwell had for so long dealt and continued to deal, but some entirely different activity, which had never been undertaken, never been suggested and never would be undertaken.

508. I also reject the argument that the Letters do not afford protection against any advisory activity of CMB, because the most they could ever have covered would have been Springwell's dealings in "Instruments" (as defined in the Letter), and thus could not have limited or excluded the Private Bank's responsibility to consider the appropriate mix of asset classes in Springwell's portfolio and to advise on diversification accordingly. I find this submission unreal, not only as a matter of language but also given the context. The whole point of the Letters is to make it clear that, in circumstances where CMB is affording Springwell access to the Investment Bank, and Springwell is going to be buying and selling emerging markets instruments through the Investment Bank, CMB is not going to be "required to give you investment advice generally or in relation to specific investments, make any inquiries about, or to consider, your particular financial circumstances or investment objectives"; that Springwell's decision to invest has been without any reliance on CMB; and that CMB is not to be liable for any loss which Springwell might incur arising out of any investment decision taken by it; see clause 4. The content of the entire letter makes it plain that it is indeed concerned directly with the issue of advice. On no sensible construction of the letter could it be said that it does not apply to the very activity to which it is directly addressed.
509. For similar reasons I reject the allied argument that the protection afforded by the Letters did not cover Springwell's claims against CIBL/CMIL, because Springwell's claims did not arise out of any activity by CIBL/CMIL in dealing for Springwell, but rather out of another activity, namely an alleged advisory activity.
510. Third, Springwell took further points of construction in relation to individual clauses in the DDCS Letters.^[129]
511. First, it submitted that there was nothing in paragraphs 1-3 which could preclude Springwell's claims, as this was just a warning that Chase would not be obliged by the SFA rules to take certain steps. The paragraphs said nothing about any common law obligations to do so. In other words it submitted that, although the statutory duty to give suitable advice (under SFA Rule 5-31) was excluded, that left unaffected any similar common law duty. Thus the DDCS Letter only addressed suitability as a matter of regulatory protection. That, it was submitted, was consistent with the (erroneous) view of the Chase Compliance Department that the Investment Bank was providing an execution-only, non-advisory service, and that all that was required was a classification of the customer as Non-Private in order to prevent advisory obligations coming in, through the back-door of the SFA Rules, into relationships which were otherwise execution-only, non-advisory. Springwell also alleged that this warning was unnecessary, as Springwell had at all times from the inception of the FSA regime been a non-private customer on account of its assets being in excess of £5 million.
512. I reject this submission. First of all the evidence showed that such notices were in practice employed and considered necessary in the case of high net worth individuals operating through private investment companies. Secondly, I accept that the wording of clause 2, is only expressly pointing out that Chase is not required by the SFA Private Customer Rules to give the client risk disclosure statements or to ensure that any advice which is given to the client is suitable to its circumstances. But when clause 3 is read in the full context of the Letter, and, in particular, clause 4, the clear implication is that, under the terms of the Letters, Chase is not accepting any liability to advise on risk, or on suitability of investments. I agree with Mr. Hapgood that there would have been no commercial purpose in serving a notice to the effect that Chase was not obliged to do under the rules something which it remained obliged to do in some other way (alternatively, that, if that had indeed been the purpose of the letter, it would have said so).
513. Secondly, Springwell submitted that the first sentence of clause 4 purported to exclude an obligation to give advice but did not address the possibility that Chase might in fact choose to give such advice or the consequences if it did. This submission goes nowhere for the following reasons:

i) I accept that the first sentence simply says that neither CMB nor the Investment Bank is required to give investment advice.

ii) But, in relation to the position of CMB, which, on my analysis of the facts, never gave advice, and was not responsible for any advice that might have been given by JA, it is a clear statement that it had no obligation to give the extensive investment advice that Springwell claims it should have given, for example in relation to the composition or management of the portfolio as a whole, or in relation to diversification, whether within the emerging markets portfolio, or between asset classes.

iii) In relation to the position of the Investment Bank, (and, indeed, of CMB, if I were to be wrong in my conclusion that it was not responsible for any advice given by JA), the statement that the Chase entities were not required to give investment advice supports my conclusion that the fact that JA gave certain advice, in his capacity as a salesman, did not impose any common law duty of care on the Investment Bank (or the Private Bank), whether in respect of advice in relation to specific investments, or more generally in relation to the composition or management of the portfolio as a whole, or in relation to diversification, whether within the emerging markets portfolio, or between asset classes.

iv) Even if I were wrong on the capacity point, the subsequent sentences of clause 4, dealing with acknowledgement of non-reliance, and exclusion of any liability for loss, which, contrary to Springwell's submissions, are strong indicators of no responsibility being assumed by Chase for any investment advice that may in fact have been given.

514. Thirdly, Springwell submitted that, because the second sentence of clause 4 begins with the words "By placing an order", this "limits the sentence to an activity Springwell did not engage in". Springwell referred to the definitions in the SFA rules, defining an order as an order to a firm from the customer to effect a transaction as agent, or any other order to a firm from the customer to effect a transaction in circumstances giving rise to similar duties. Springwell also submitted that, in any event, the words "By placing an order…" qualify the second sentence and the sentences which follow; to the extent that those sentences seek to limit or exclude liability in respect of advice, they only do so in respect of advice leading to the "placing of an order" (i.e. a decision to purchase); they say nothing about whether or not Springwell was entitled to rely upon advice continue to hold investments already purchased or, for that matter, general strategic advice about desirable portfolio shape.
515. Again I find this to be a un-commercial approach to the construction of a perfectly simple clause. The second sentence makes it plain, and indeed this is its only possible context, that what it is concerned with is the purchase of an instrument by Springwell from Chase. All the order does is to trigger the making of the representation. The further argument that somehow the following sentences excluding liability are, because of the circumstances which trigger the representation, restricted to advice leading to the placing of an order, is linguistically (and commercially) unsupportable.
516. Springwell's next argument under this head was that the exclusion of liability in the fifth sentence of paragraph 4 did not extend to liability for gross negligence and wilful misconduct; that it was restricted to liability arising "in consequence of any service contemplated in this letter"; and that the advisory relationship was not so contemplated, and therefore cannot be covered by the exclusion clause. In this context, Springwell submitted that the service contemplated in the Letters was the Investment Bank dealing for Springwell on an execution-only basis; the Letters did not contemplate that CMB or CIBL/CMIL would give investment advice; indeed they expressly provide in the first sentence of Paragraph 4 that they have no such obligation, and, in any event, "investment advice" is a distinct activity from "dealing". That being so, if CMB or CIBL/CMIL chose to give advice and Springwell made an investment decision in reliance on it, there is no reason to regard that as a decision made "in consequence" of any service contemplated in the Letters Further, Springwell submitted, even if clause 4 could extend to advice, it could only extend to advice in the context of a purchase; and that the words were inapt to extend to advice to continue to hold investments already purchased.
517. Again, I cannot accept these submissions. It is correct that the exclusion clause does not exclude liability for loss arising as a result of gross negligence or wilful misconduct, but that point is irrelevant to the issue whether, in the circumstances, a duty of care arose at all. Nor can I accept the argument that the exclusion of liability provision does not cover loss arising from the possible giving of investment advice, or the failure to give investment advice. The service contemplated is the dealing service in all its aspects, including (as is apparent from the terms of the Letters) any possibility of investment advice in connection with dealing, whether connected with a purchase or otherwise, which impacts on an investment decision.
518. Springwell further submitted that the exclusion of liability in paragraph 6 was limited to excluding liability arising from the provision of "documents" or "information" regarding "any instrument or investment opportunity", i.e. factual information of a type likely to be contained in documents such as information memoranda, investment advertisements etc. and accordingly the focus of the paragraph was on matters of fact, rather than opinion; that was consistent with the statement that CMB and CIBL/CMIL would not verify the "documents or information" and the disclaimer for their "fairness, accuracy or completeness". Springwell submitted ,therefore, that, properly understood, the paragraph did not purport to exclude liability in respect of opinion or advice; alternatively, and even if "information" could stretch to encompass advice, it would be limited to advice about "any investment or investment opportunity". Those words were inapt to cover advice on, for example, the composition or management of a portfolio as a whole or diversification between asset classes.
519. In my judgment, since the exclusion of liability provision in the penultimate sentence of clause 4 covers any advice in fact given by the Chase entities (for which, on this hypothesis, they were legally responsible), and, indeed, liability for any losses arising out of any investment decision taken in the absence of such advice, there is no need for them to rely on clause 6. However, in any event, I conclude that, on the construction of the words used, the exclusion in clause 6 did apply directly to all oral communications made by JA to AP in respect of Springwell's investments, which could be characterised as "information" or "recommendations". That is because, in context, "information" has to be construed as including oral "recommendations", since written recommendations clearly fall within the description of "information". However, in my view the exclusion in clause 6 is not directed at anything other than liability for "information" relating to a particular instrument or investment opportunity.
520. Fourth, the final point on construction taken by Springwell was a specific point on the ambit of the DDCS letters, and whether all of Springwell's investments fell within the definition of "Instruments". Mr. Brindle correctly pointed out that the provisions of the DDCS Letters apply to the activity of CIBL/CMIL "when dealing for [Springwell] in such instruments". The reference to "such instruments" is a reference back to the first introductory paragraph where "Instruments" are defined as "debt and equity securities of public and private sector issuers^[130] located in developing countries". Mr. Brindle submitted that three of the assets in which Springwell invested did not fall within that definition; namely the GKO-linked Notes (of which Springwell invested in 42 between 1996 and 1998), the VW RUR Note (of which Springwell purchased US$5m in May 1998) and the Ukraine Note (of which Springwell purchased US$5m in January 1998). In support of this contention, he made the following submissions:

i) The GKO-linked Notes fell outside the definition because, although GKOs were debt securities of a Russian issuer (i.e. the Russian government), the GKO-linked Notes were not. They were structured products issued by Chase entities in the Channel Islands.^[131]

ii) The VW RUR Note also fell outside the definition of "Instruments" because it was not issued by an issuer located in a developing country. It was issued by Volkswagen Financial Services NV, a VW finance subsidiary based in the Netherlands, whose obligations were guaranteed by Volkswagen Financial Services AG (based in Germany)

iii) The Ukraine Note also fell outside the definition of "Instruments" because the Note was issued by Chase Manhattan Bank Luxembourg SA, not by an issuer located in a developing country.

iv) There was no warrant for Chase's approach that the court should give the words ("debt and equity securities of public and private sector issuers located in developing countries") a construction beyond their natural meaning on the grounds that there would have been no point in CIBL/CMIL seeking to cover some, but not all of, its investment activity. Chase drafted the DDCS Letters and it is stuck with their terms.

521. For the reasons advanced by Chase, I do not think that, against the commercial background of Springwell's actual dealings in emerging markets securities, one can realistically construe the terms of the DDCS Letters so restrictively as to exclude structured or derivative products. I accept Mr. Hapgood's submission that the words "debt and equity securities of public and private sector issuers located in developing countries" should be construed, in their commercial context, as referring generally to all instruments which were sold by CIBL (under the 1993 letter) or CMIL (under the 1997 letter) to Springwell and in which the economic benefits and risks of the investment were tied to the emerging markets. Each of the GKO-Linked Notes, the Ukraine Note and the VW Note was such an instrument.
522. The relevant factual background showed that there was throughout the 1990s a course of dealing in which CIBL and then CMIL sold emerging markets instruments to Springwell, with no distinction drawn at any stage between different types of instruments or structured instruments (and no reason for any distinction). Further, by the time of the 1997 Letter, Springwell had already purchased several GKO-Linked Notes from CIBL which were subject to the terms of the MFA: terms which themselves provided that, in relation to such purchases, Springwell was a non-private customer, which had made its own decision to purchase the relevant instrument, did not expect CIBL or any affiliate to be responsible for advising it as to the merits of any transaction and had not received any advice. In such circumstances, I accept Mr. Hapgood's submission that an objective reading of the 1993 or 1997 Letters does not create a distinction between different categories of instrument, where no such distinction had previously been drawn or ever suggested.
523. I also accept the submission that, in context, the words "dealing … in", in the phrase "with a view to you dealing for your own account in various debt and equity securities …", refer not just to the process of purchase and sale, but also to the process of investing and/or participating in, so as to include any investment or participation in an emerging country or in an instrument issued by a borrower whose seat is in an emerging country, through a structured or derivative product. "Dealing" is a word of very wide import, particularly in this context. Of the various instruments:

i) The GKO-Linked Notes were pass-through instruments in which the benefits and risks of GKOs were passed directly to the customer. As such, by each purchase of a GKO-Linked Note, Springwell was in economic substance and reality investing and/or participating in Russia and in a GKO, through the convenient structure of the pass-through Note, and accordingly was dealing in Russia and/or in the debt security of the Russian government for the purposes of the 1993 and 1997 Letters.

ii) Equally, through the purchase of the Ukraine Note, Springwell was in economic substance and reality investing and/or participating in Ukraine and/or in the underlying Ukraine loan, and accordingly was dealing in Ukraine and in a debt security of the Ukraine government for the purpose of the 1997 letter.

iii) In relation to the VW Note, the benefits and risks of which were tied to fluctuations in the value of the Russian currency, Springwell was in economic substance and reality investing and/or participating in Russia and accordingly was dealing in Russia for the purpose of the 1997 letter.

524. Such an approach is in fact entirely consistent with Springwell's own case, as presented in its pleadings and submissions, that the purchases of the Linked Notes did in fact represent, as a matter of economic substance and reality, and were to be treated as, Russian investments and/or investments in GKOs or Ukrainian investments or an investment in a Ukrainian loan.

Specific construction points on the GMRA

525. Springwell contends that the GMRA is an agreement between Springwell and CMB and that, accordingly, its provisions cannot affect the claims against CIBL, CMIL or CMSCI. It also contends that the representations in the GMRA only relate to "Transactions" as therein defined. Thus it submits that the Relevant Provisions apply "only in respect of the financing transactions" in contrast to the "underlying transactions of sale and purchase between Springwell and CMIL".^[132] It points to the definition of "Transactions" in Clause 1 of the GMRA, and correctly states that the transactions there referred to are the purchase, repurchase or reverse repurchase transactions to be entered into between Springwell and CMB; in other words that "Transactions" as defined are not the underlying purchases of emerging market investments from CMIL, or CMSCI (as the case may be) but only the subsequent repo transactions between Springwell and CMB pursuant to which Springwell leveraged the emerging market bonds by selling them to CMB (subject to a commitment to repurchase them at a later stage). Accordingly, Mr. Brindle submitted that the Relevant GMRA Provisions are irrelevant to Springwell's claims; whatever their effect, they could only give rise to estoppels in respect of the repo transactions (i.e. the "Transactions" as defined) and not in respect of the underlying purchase; that the underlying purchase by Springwell of an emerging market bond and the repo transaction which related to that bond were clearly separate transactions, usually involving different Chase entities and were documented by Chase as separate transactions in the transaction confirmations.
526. It is right that, as a matter of contract, only CMB (and not the Investment Bank) can rely on the Relevant Provisions in the GMRA, because the Investment Bank was not a party to the agreement. However, evidentially, it is part of the wider and consistent picture that points against the coming into existence of any duty of care on the part of the Private Bank or the Investment Bank.
527. However, I do not accept Mr. Brindle's submission that the limited definition of "Transaction" means that CMB is not entitled to rely on the Relevant Provisions of the GMRA to exclude liability for Springwell's claims or that such provisions are irrelevant to Springwell's claims. Nor do I accept that, whatever their effect, they could only give rise to estoppels in respect of the financing transactions and not in respect of Springwell's underlying purchases of emerging markets instruments.
528. For ease of reference, I repeat clause 25 of the GMRA. It provided:

"Each Transaction shall be deemed to have been entered into by each party in reliance only upon its own judgment. Neither party shall have any responsibility or liability whatsoever in respect of any advice given as to whether or not the other party should enter into any Transaction (whether as Buyer or Seller), or as to any subsequent actions relating thereto or on any other commercial matters concerned with any Transaction or in respect of views expressed by it or any of its officers, employees or agents, whether or not such advice was given or views were expressed at the request of the other party."

529. The first sentence is a deeming provision which relates only to a financing transaction. However, the second sentence is in wider terms and excludes any responsibility or liability for any advice:

"… given as to whether or not the other party should enter into any Transaction (whether as Buyer or Seller), or as to any subsequent actions relating thereto or on any other commercial matters concerned with any Transaction or in respect of views expressed by it or any of its officers.. " [My emphasis.]

On the assumption that such a provision is effective (notwithstanding Springwell's later avoidance arguments), it would make it impossible for Springwell, in my view, to sue CMB in respect of any actual advice that it might have given (whether by JA or otherwise) in relation to the suitability (or otherwise) of any underlying purchase transaction financed by the GMRA, since, on any basis such a transaction was a "commercial matter ... concerned with any Transaction".

530. I also conclude that clause 9, in combination with clauses 24 and 25, are strong pointers against the existence of any free-standing duty of care on the part of CMB, to give general investment advice in relation to Springwell's emerging markets investment activity, whether as to composition of the portfolio, diversification, asset allocation or otherwise. Furthermore, although (with the exception to which I have referred), the clauses are expressly stated to apply to financing transactions, since the financing transactions were an integral and necessarily dependent element of each individual purchase transaction, this (as Mr. Hapgood submitted) is a distinction without a difference. Realistically, a claim against CMB in respect of an underlying purchase transaction could not be separated from a claim in respect of a financing transaction. Thus, if and to the extent that it is alleged that CMB wrongly advised - or failed to advise - in relation to any instrument purchased under the GMRA, the Relevant Provisions in the GMRA would, in my judgment, provides a contractual defence to CMB in respect of each such allegation. In relation to an alleged failure on the part of CMB to advise that Springwell should not invest in such instruments, I take the view that clause 9(ii) and the first sentence of clause 25 in particular indicate that no positive advisory duty of care was imposed on CMB in relation to Springwell's trading activity pursuant to the terms of the GMRA.

Specific construction points on the GKO-Linked Notes Documentation

531. In relation to the GKO-Linked Notes, Springwell submitted that Chase was not entitled to rely on clauses 5(e), 6(a) and 6(c) of the Notes for the following reasons relating to the construction of the clauses:

i) the only Chase entity which could take advantage of the Relevant Provisions was CMSCI. CMIL was not a party to the Note. CMB was a party to the Note but as "Holder". The Relevant Provisions could not, therefore affect the claims against CMB and CMIL. The Notes were contracts between CMSCI and "the Holder". "The Holder" was a defined term meaning CMB, and CMB signed the Notes in that capacity. The representations/warranties made by "the Holder" in Section 6 expressly related to "the Holder" (i.e. CMB) and to its state of mind. They did not relate to or say anything about Springwell or its state of mind (when it decided to invest in the relevant GKO-linked Note). Accordingly, Mr Brindle submitted that they could not give rise to an estoppel preventing Springwell from asserting that it relied on advice as to the advisability of purchasing the GKO-linked Notes or on representations or that it had such advice or representations given to it; none of these documents was material to the dealings between Springwell and Chase.^[133]

ii) None of the clauses could protect Chase from liability for advice freely given despite the terms of the Notes. In any event, the language of all of the clauses is inapt to prevent Springwell from relying upon post-purchase representations or advice as to whether or not to sell or to continue to hold the Notes. The language of clauses 5(e) and 6(a) is inapt to prevent reliance on advice or on the representations of opinion (which are the subject of Springwell's misrepresentation claim), whether pre- or post-purchase. Nor do clauses 5(e) or 6(a) even purport to address the position of advice or representations by CMIL (which was JA's employing entity).

532. I do not agree with the first point. It is looking at the matter too simplistically to state that the GKO-Linked Notes were merely contracts between the issuer (CMSCI, for all the later Notes) and the Holder, and that the Holder was in fact CMB. As the GKO-Linked Note confirms make clear, the contract for the issue of the Notes was between the issuer and Springwell, and under that contract Springwell was entitled to have the Note issued in its name. (Indeed the confirm stated that the Note had been issued to Springwell). Under the terms of that contract, the issuer and Springwell agreed that, because of the financing arrangements, whether under the MFA or the GMRA, the Note would actually be issued in the name of CMB, which was purchasing the Note from Springwell. Under each financing mechanism, title was to remain with CMB, until satisfaction of all Springwell's liabilities under the financing arrangements, when it became theoretically entitled to have the Note transferred into its own name. If the Note matured before that occurred then no such transfer would take place. [CHECK last sentence for factual accuracy.]
533. I agree with Mr. Hapgood's submission that this has no bearing on the contractual effect of the terms of the Notes. The reality was that, in effect (whatever the strict legal position), at all times, Springwell was the beneficial holder/owner of the Notes, in that, subject to satisfaction of its financing obligations to CMB under the GMRA, it was entitled to have them issued in its name on purchase from CMSCI, and transferred into its name on repurchase from CMB. Thus Springwell could only ever make a claim in respect of the purchase or sale of the GKO-Linked Notes subject to the contractual terms of those Notes, whether or not Springwell was named as the Holder when they were first issued.
534. As to Springwell's second series of points:

i) The point that none of the clauses could protect Chase from liability for advice freely given despite the terms of the Notes, is dealt with later in this judgment. The language at the end of clause 6(c) clearly purports to do so, by the representation that that the Holder has not relied upon any representation and that none has been made..

ii) I accept that, as a matter of language, the clauses do not expressly address post-purchase representations or advice as to whether or not to sell, or to continue to hold, the Notes. The terms of the Notes (and the related terms and conditions sheet and risk disclosure sheet) are, however, a strong counter-indicator as to the existence of any duty of care to give general advice. Whether, and to what extent, Chase can rely on the language of the Notes in relation to Springwell's misrepresentation claim is considered below.

iii) The language of clauses 5(e) and 6(a) may be inapt to prevent reliance on advice or on the representations of opinion, whether pre- or post-purchase, and may not address the position of advice or representations by CMIL, but clause 6(c) certainly does so in relation to representations by CMIL in relation to purchasing the Notes.

535. Springwell made various construction points in relation to the confirms, and the statement that Springwell represented and warranted that it had read the Note and understood the terms of the Note^[134]. The first point was that the statement was not true (although strictly this is not a point of construction.) This, in my view, is irrelevant, even if it were the case. The confirm records the basis upon which Springwell agreed to proceed with the transaction. The second point was that the representations in the Note were made by the "Holder" and not by Springwell, and, therefore, Springwell was doing nothing in the confirms when it stated that it accepted the Notes' terms. I have already dealt with this point in relation to the Notes themselves. The third point was that the statement that Springwell confirmed the acceptance of the terms did not incorporate the terms of the Notes into any contract between Springwell and "Chase", by which I assume reference is being made CMB and CMIL. I do not agree. In relation to CMB, it was, in any event, a party to the Note contract as Holder; I see no reason why the terms of the Note should not be incorporated into its contractual dealings with Springwell under the GMRA in relation to the relevant Note; that is clearly the purpose of the statement. So far as CMIL is concerned, it may not have been a party to the contracts for the purchase and financing of the GKO-Linked Notes, but clearly it was intended to have the benefit of clause 6(c) in its dealings with Springwell under the terms of the 1997 DDCS Letter, including providing it with the opportunity to purchase GKO-Linked Notes. In the wider evidential context, moreover, the provisions of the Notes, the terms and conditions and the confirms strongly support the argument that CMB and CMIL had no duty of care to give general or specific investment advice.

Can Springwell avoid the apparent effect of the Relevant Provisions because they were allegedly inconsistent with the existing advisory relationship between Chase and Springwell

536. I turn now to deal with Springwell's argument that Chase cannot rely on the Relevant Provisions, or, alternatively, that they should not be given effect to, because they are inconsistent with the actual advisory relationship which existed between Chase and Springwell.
537. Generally, both under this head and in relation to Springwell's next series of arguments, Mr. Brindle, in his closing oral submissions, made six headline points as to why the authorities relied upon by Mr. Hapgood (to demonstrate the significance of the Relevant Provisions in establishing that no duty of care existed on the part of Chase) were not applicable to the particular circumstances of Springwell's situation.

i) First, Mr Brindle pointed to the fact that the "advisory relationship" between Chase and Springwell, in the sense of JA giving advice and recommendations to Springwell, had been in existence for four years or so before the first relevant document, the MFA, was introduced in 1992 to govern the parties' relationship.

ii) The second feature to which Mr. Brindle referred was that it had been agreed, as a result of the introduction of JA to AP that Chase, through the Private Bank and the Investment Bank, would give investment advice to Springwell. I have, of course, already decided against Springwell on this point, so that this feature does not come into play.

iii) The third point was that the documents did not purport to alter anything. They were required by Chase's compliance or legal department, but did not in fact result in any change to what was actually happening: namely JA advising or recommending to AP what to buy, and the Private Bank giving certain limited (albeit inadequate) advice to diversify.

iv) Fourth, Mr. Brindle submitted that, in many respects, the documents purported to contradict the facts as they actually were on the ground, both as they had been, and as they were intended to be, going forward. Thus, for example, the representations or acknowledgements that Chase was providing an "execution only" service, or was not actually giving advice, was directly contrary to the facts and everybody's understanding of the facts. In other words, Chase knew that the acknowledgements or representations were untrue.

v) Fifth, Mr. Brindle submitted that the Relevant Provisions relied upon by Chase could only be exclusion clauses or disclaimers, rather than, as Chase contended, provisions which defined the relationship between the parties.

vi) The sixth feature relied on by Mr. Brindle was that none of the Relevant Provisions, and in particular the terms that were adverse to Springwell, were ever explained to AP or SP.

538. Thus, in this section of his argument, Mr. Brindle submitted that Chase could not rely upon representations or acknowledgements of fact in the Relevant Provisions, such as, for example:

i) that Springwell was a sophisticated investor;

ii) that the transaction had been conducted on an execution-only basis;

iii) that the Chase entities had not given and Springwell had not received any advice in relation to any of the relevant transactions;

iv) that Springwell had not relied upon any advice from any of the Chase entities.

This, it was submitted, was because of the principle articulated by the Court of Appeal in Lowe v Lombank Limited^[135]; namely that, where a false statement is made about a matter of past fact, that statement cannot operate either as an estoppel by representation or (where the fact is expressed as an agreement) a contractual estoppel, unless: (a) the maker of the statement intended it to be taken as true and relied upon; (b) the other party believed it to be true; and (c) the other party in fact relied upon it. In this context, he also referred to another decision of the Court of Appeal, E A Grimstead & Son Limited v McGarrigan^[136] and Chitty on Contracts^[137]

539. Lowe v Lombank Limited was a typical case on its facts, concerning a hire-purchase agreement between a finance company and a 65 year old widow, who wanted to purchase a Standard motor car (for under £300). The car had been represented to her by the salesman as "perfect" or "almost perfect". She signed a hire-purchase agreement (which she did not read) on delivery of the car, which was not, in fact, left with her then, but taken away on the pretext that some minor adjustment was required, and subsequently returned to her. On that occasion she signed a delivery receipt purporting to confirm that she had read the hire-purchase agreement and fully understood its terms and conditions and that she had examined the goods and they were in good order. Needless to say, the car turned out to be defective.
540. Section 8 of the Hire Purchase Act 1938 ("the 1938 Act") provided:

"…

(2) Where the hirer expressly or by implication makes known the particular purpose for which the goods are required, there shall be an implied condition that the goods shall be reasonably fit for such purpose.

(3) The warranties and conditions set out in subsection (1) of this section shall be implied not-withstanding any agreement to the contrary, and the owner shall not be entitled to rely on any provision in the agreement excluding or modifying the condition set out in sub- (2) of this section unless he proves that before the agreement was made the provision was brought to the notice of the hirer and its effect made clear to him." (My emphasis).

541. The relevant provisions of the hire-purchase agreement provided as follows:

"8. The owners do not let or supply the goods or any part thereof with or subject to any condition or warranty express or implied by statute, or otherwise as to the capacity, age, quality, description, state, condition or fitness for any purpose or otherwise whatsoever save in the case of the hire-purchase price in the schedule hereto, not exceeding £300 when the only warranties shall be those implied under the Hire-Purchase Acts, 1938 and 1954, in respect of hire-purchase transactions within the provisions of those Acts but subject to the exclusion of warranties by reason of clause 9 hereof.

9. If the hire-purchase price shown in the schedule hereto does not exceed £300 but not otherwise the following provisions shall take effect:

…

(ii) The hirer acknowledges that he has examined the goods prior to the signing of this agreement and that there are no defects in the goods which such examination ought to have revealed and that the goods are of merchantable quality. The hirer further acknowledges and agrees that he has not made known to the owners expressly or by implication the particular purpose for which the goods are required, and that the goods are reasonably fit for the purpose for which they are in fact required."

542. The County Court judge held that nobody explained the hire-purchase agreement to the plaintiff when she signed it. It was too late for her to claim rescission of the agreement; if she was to obtain relief it must be in damages. He further held that since the plaintiff's attention had never been drawn to the provisions of clauses 8 and 9 of the agreement, she was not estopped from relying on the implied condition of reasonable fitness imported by section 8(2) of the Hire-Purchase Act, 1938; but he held that she was estopped by the receipt, which she had subsequently signed, from complaining of the condition of the car. He, accordingly, entered judgment for the defendants. In other words, he appears to have held, on the first point, (although this is not clear from the report) that the statement in clause 9 of the hire-purchase agreement (that the hirer had not made known to the owners the particular purpose for which the goods were required) amounted to a conclusion effectively excluding or modifying the statutory condition of fitness for purpose set out in section 8(2) of the 1938 Act, and therefore the finance company was not entitled to rely on it by virtue of section 8(3) of the 1938 Act because it had never been brought to the plaintiff's attention. But he then went on to hold against the plaintiff in relation to the terms of the delivery receipt. The plaintiff appealed. The defendant, by cross-notice, sought to support the actual decision in the defendant's favour by relying on the provisions of clause 9 of the hire-purchase agreement.
543. Counsel for the finance company on the appeal seems to have argued (although it is far from clear from the report) that the relevant provision in clause 9(ii) of the hire-purchase agreement was not an estoppel by representation, but rather a contractual agreement to the effect that the parties were contracting on the basis that no statement as to purpose had been made; and, one assumes (although, again, this is not mentioned in the report) went on to argue that it followed that the provision was not caught by section 8(2) of the 1938 Act. Diplock J, as he then was, giving the judgment of the Court of Appeal, dismissed this argument as follows:

"This curiously drafted clause was never brought to the notice of the plaintiff and its effect was not made clear to her. Nor, despite Mr. Roche's efforts, has it been made clear to us. It is expressed to be an acknowledgment, that is to say, a representation, by the plaintiff that she had not made known by implication that the car was required for a particular purpose, that is, as a means of transport, and also an agreement that she had not made that purpose known to the defendants. In so far as it was a representation, it could operate only as an estoppel preventing the plaintiff from asserting the contrary, but Mr. Roche expressly disclaims reliance upon it as an estoppel, no doubt for the very good reason that there was no evidence (and it is difficult to see how there could have been truthful evidence) that the defendants believed in the truth of the representation. To call it an agreement as well as an acknowledgment by the plaintiff cannot convert a statement as to past facts, known by both parties to be untrue, into a contractual obligation, which is essentially a promise by the promisor to the promitee that acts will be done in the future or that facts exist at the time of the promise or will exist in the future. To say that the hirer 'agrees' that he has not done something in the past means no more than that the hirer, at the request of the owner, represents that he has not done that thing in the past. If intended by the hirer to be acted upon by the person to whom the representation is made, believed to be true by such person and acted upon by such person to his detriment, it can give rise to an estoppel: it cannot give rise to any positive contractual obligation. Although contained in the same document at the contract, it is not a contractual promise.

There lies the fallacy in Mr. Roche's contention. Whether or not the plaintiff made known to the defendants by implication the particular purpose for which she required the car is a pure question of fact as to the state of knowledge of the defendants to be inferred in the light of all the circumstances, including the terms of the contract itself. On this issue, the rule of construction relied on by Mr. Roche that you cannot imply in a contract a promise, which is inconsistent with an express promise, is irrelevant, for the inference to be drawn from the terms of the contract that the defendants knew the particular purpose for which the plaintiff required the car is not an implied promise, nor is the representation in clause 9(ii) of the contract an express promise.

We reach this conclusion without reluctance, for clause 9 (ii) is clearly an attempt, which only the size of the print in which it is set out prevents one calling blatant, to evade the provisions of section 8 (2) and (3) of the Hire-Purchase Act, 1038." (My emphasis.)

544. He then went on to deal with the separate arguments in relation to the delivery receipt, where the finance company's case was clearly based on estoppel by representation. In that context, Diplock J set out the three elements necessary to found an estoppel by representation, namely: (a) that there was a clear and unambiguous statement; (b) that the plaintiff meant it to be acted upon by the defendant, or, at any rate, so conducted herself that a reasonable man would take the representation to be true and believe that it was meant that he should act upon it; and (c) that the defendant did in fact believe it to be true and was induced by such belief to act upon it.^[138] These requirements for a representation to operate as an estoppel were also emphasised by Chadwick LJ in E A Grimstead v McGarrigan^[139] and in Watford Electronics v Sanderson^[140].
545. It could therefore be said that, on a proper analysis, the ratio of Lowe v Lombank was merely that a contractual statement, purportedly setting out a past fact that both parties knew to be manifestly untrue, amounted to a provision excluding or modifying the provisions of the statutory condition set out in section 8(2) of the 1938 Act and, as such, as it had not been brought to the plaintiff's attention, was ineffective.
546. However, Mr. Brindle, in reliance on Lowe v Lombank (in particular the passage which I have underlined in the citation above), and Chitty paragraph 14-133, argued that, if a statement of past fact was expressed as an agreement, "it could not amount to a contractual obligation"; as a matter of substance it was no different from a representation; and therefore the requirements for an estoppel by representation to arise, likewise applied to such a contractual statement.
547. Mr. Brindle also contended that, to the extent that Chase sought to rely on Peekay Intermark v Australia and New Zealand Banking Group (supra), a later decision of the Court of Appeal, to support the proposition that a contractual estoppel was not required to satisfy the requirements applicable to estoppel by representation:

i) The relevant paragraphs in Peekay were obiter.

ii) The decision in Peekay was wrong and given per incuriam as it was inconsistent with Lowe v Lombank which was not cited to the Court in Peekay.

iii) The failure to cite Lowe v Lombank could not be dismissed as some sort of technicality on the basis that Chadwick LJ must have had the case in mind having been part of the court which decided Grimstead; that approach could not be right, because, there was no attempt in the Peekay judgment to deal substantively with the issue raised by Lowe v Lombank; the tension between Peekay and Lowe v Lombank was unresolved. Lowe v Lombank could not be dismissed, as Chase sought to argue, as a case where the relevant clause did not use the language of agreement, because it plainly did and was treated by the Court as purporting to embody an agreement.

iv) In any event the situation envisaged by Moore-Bick LJ in Peekay was different. He said at paragraph 56 that:

"There is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction, whether it be the case or not".

v) Mr. Brindle submitted that this was the language of estoppel by convention. The parties can agree, if they wish, that for their contractual purposes, black shall be deemed to mean white. But they can only do this as the adoption of a convention going forward. They cannot "agree" that they have done something in the past or that a subsisting relationship (which they are not amending or even purporting to amend) shall be characterised as something it is not, without running into the difficulty explained in the passage from Lowe v. Lombank set out above. They can amend it, or they can settle a disagreement about an existing state of affairs in order to found a basis for subsequent performance, but the recital of something untrue which is not relied upon as true so as to create an estoppel is not a contractual obligation.

vi) To the extent that the Relevant Provisions contained statements of fact characterised as agreements rather than representations, a fortiori statements as to past facts, the court is bound by the approach in Lowe v Lombank as to the requirements for any estoppel to arise. That means, inter alia, that Chase must prove it believed the statements to be true and that it acted in reliance upon that belief.

548. Before embarking on the legal analysis, it is perhaps pertinent to remind oneself that, in light of my finding on the facts, the so-called "untrue" statements in the Relevant Provisions are fairly modest in scope. Thus:

i) By 1992 (when the MFA was signed) and certainly increasingly thereafter, my finding is that it was not an untrue statement to refer to Springwell as a "sophisticated" investor.

ii) Although in 1992, and thereafter, AP was in receipt of advice (in the loose sense) and recommendations from JA, that was advice given in JA's capacity as a salesman, and not pursuant to any investment advisory agreement concluded at the time of Springwell's introduction to JA (or thereafter), either with the Private Bank or the Investment Bank.

iii) Although, for similar reasons, it may not have been correct to describe the service provided by JA as "execution-only" (depending on what view one took of the phrase "execution-only"), the advice being provided was of the type described in the previous sub-paragraphs.

iv) Although, as I have found, AP relied to a certain extent upon JA's advice in making his investment decisions for Springwell, such decisions were ultimately his own.

549. Thus, if, and to the extent that, any of the statements in the Relevant Provisions did not accurately reflect certain aspects of Springwell's actual trading relationship with Chase, any such inconsistency in, is qualitative terms, very different from the obviously false assertion in Lowe v Lombank that the plaintiff had not made the purpose of her acquisition of the car known to the defendant finance company.
550. In my judgment, the ratio of the decision in Lowe v Lombank cannot, when analysed in its context, be regarded as authority for the far-reaching proposition that there can never be an agreement in a contract that the parties are conducting their dealings on the basis that a past event had not occurred, or that a particular fact was the case, although both parties know that, in reality, that past event had, or might have, occurred, or that the particular fact was not, or might not have been the case. As I have already pointed out, all that the Court of Appeal actually had to decide for the purposes of Lowe v Lombank (in relation to the first point) was that the false statement in the agreement as to non-notification of purpose was one which fell foul of section 8(3) of the 1938 Act. Although Diplock J went further than this, and concluded that the so-called agreement had, in context, to be regarded as a representation and therefore satisfy the requirements of an estoppel by representation, the reality, I suggest, is that he regarded the so-called "agreement" as no more than a sham provision of the type shortly thereafter recognised by the Court of Appeal (including Diplock LJ) in Snook v London & West Riding Investments Ltd [1967] 1 All ER 518. I do not consider that he was addressing the issue whether a contractual estoppel can ever be based on an agreed statement about past facts, even though they may not satisfy the requirements of an estoppel by representation.
551. In Peekay, (supra) the two substantive judgments were given by Moore-Bick LJ and Chadwick LJ. Moore-Bick LJ first considered the defendant's argument that the claimant was not induced to enter into the purchase by reason of the oral misrepresentation and held that this was well-founded. Moore-Bick LJ concluded that he was, instead, induced by his own assumption that the investment product described in the documentation corresponded to the description he had previously been given. On that basis, Moore-Bick LJ reached the conclusion that the appeal should be allowed. However, he then went on to consider an alternative argument by the defendant, to the effect that the claimant was estopped from relying on any misrepresentation by reason of the terms of the documentation which it had signed. That documentation included two passages in a risk disclosures statement, which contained detailed warnings to investors of the risks associated with various kinds of emerging markets investments, in the following terms:

"You should also ensure that you fully understand the nature of the transaction and contractual relationship into which you are entering"

and

"The issuer assumes that the customer is aware of the risks and practices described herein, and that prior to each transaction the customer has determined that such transaction is suitable for him". ^[141]

552. Moore-Bick LJ concluded that these clauses created a contractual estoppel which prevented any allegation of misrepresentation as to the nature of the underlying instrument: He said^[142]:

"56. There is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction, whether it be the case or not. For example, it may be desirable to settle a disagreement as to an existing state of affairs in order to establish a clear basis for the contract itself and its subsequent performance. Where parties express an agreement of that kind in a contractual document neither can subsequently deny the existence of the facts and matters upon which they have agreed, at least so far as concerns those aspects of their relationship to which the agreement was directed. The contract itself gives rise to an estoppel: see Colchester Borough Council v Smith [1991] Ch. 448, affirmed on appeal [1992] Ch.421.

57. It is common to include in certain kinds of contracts an express acknowledgment by each of the parties that they have not been induced to enter the contract by any representations other than those contained in the contract itself. The effectiveness of a clause of that kind may be challenged on the grounds that the contract as a whole, including the clause in question, can be avoided if in fact one or other party was induced to enter into it by misrepresentation. However, I can see no reason in principle why it should not be possible for parties to an agreement to give up any right to assert that they were induced to enter into it by misrepresentation, provided that they make their intention clear, or why a clause of that kind, if properly drafted, should not give rise to a contractual estoppel of the kind recognised in Colchester Borough Council v Smith. However, that particular question does not arise in this case. A clause of that kind may (depending on its terms) also be capable of giving rise to an estoppel by representation if the necessary elements can be established: see E A Grimstead & Son Ltd v McGarrigan (CA) (unreported, 27^th October 1999)

…

60. The purpose of the Risk Disclosure Statement was both to draw to the attention of the investor the need for caution when investing in emerging markets and to make it clear that ANZ was only willing to enter into a contract with him on the assumption that he had satisfied himself that the transaction was suitable for him. By confirming that he had read and understood the statement and returning it with his instructions to make the investment Mr. Pawani offered to enter into a contract with ANZ on behalf of Peekay on those terms and that offer was accepted by the bank when it implemented his instructions. As a result it was part of the contract between them that Peekay was aware of the nature of the investment it was seeking to purchase and had satisfied that it was suitable for its needs. In those circumstances, and since it is not suggested that the bank misrepresented to Mr. Pawani the effect of the documents, I do not think that it is open to Peekay to say that it did not understand the nature of the transaction described in the FTCs; and if that is so, it cannot assert that it was induced to enter into the contract by a misunderstanding of the nature of the investment derived from what Mrs. Balasubramaniam had said about the product some days earlier".

553. Moore-Bick LJ concluded at paragraph 61 by stating: "For these reasons too I would allow the appeal".
554. Although Moore-Bick LJ also considered that the statements might give rise to an estoppel by representation, in addition to the contractual estoppel, if the conditions set out in EA Grimstead & Son v McGarrigan applied, as there had been no evidential enquiry into those conditions, he concluded that point could not be pursued on appeal^[143].
555. Lawrence Collins LJ agreed with Moore-Bick LJ. Chadwick LJ also agreed but added a judgment of his own. In that judgment, he rejected the judge's finding of inducement for three reasons. The third reason was as follows:

"Third, Peekay could not be heard to say (through Mr Pawani) that it had thought it unnecessary to read and understand the FTCs. The Risk Disclosure Statement was a contractual document – as Mr Pawani recognised when he returned it, signed, with the letter of 7 February 1998. ANZ accepted the investment instructions in that letter on the basis of the investor's confirmation that it had read and understood the terms of the Statement. That confirmation, as it seems to me, operates as a contractual estoppel to prevent Peekay from asserting in litigation that it had not, in fact read and understood the Risk Disclosure Statement. And, if it had read and understood the Risk Disclosure Statement, it must be taken to have accepted that ANZ would assume that it fully understood the nature of the transaction into which it was entering, was aware of the risks, and had determined that the transaction was suitable for its purposes. Given that, Peekay could not be heard to say that Mr Pawani had assumed that the FTCs which he had signed on its behalf did not need to be read and understood".^[144]

556. I accept Mr. Hapgood's submissions that:

i) the decision of the Court of Appeal in Peekay is not obiter insofar as it relates to contractual estoppel;

ii) that Peekay and subsequent authorities indeed recognise that there is a difference between contractual estoppel and estoppel by representation, in that the former species of estoppel does not requirement the parties to prove detrimental reliance;

iii) a contractual estoppel can arise from an agreement or a representation about past facts;

iv) that the decision in Peekay was not reached per incuriam, and is not inconsistent with the ratio in Lowe v Lombank; and

v) that the decision in Peekay shows that the contractual effect of the Relevant Provisions is to preclude the coming into existence of any general duty of care to give investment advice; and Springwell is not entitled to contend that the Relevant Provisions are not binding upon it simply because: at various stages of the relationship, the Investment Bank, by JA, (or indeed the Private Bank) may, to a greater or lesser extent, have been giving advice or making recommendations to AP; or AP may, to a greater or lesser extent, having been relying on such advice in making Springwell's investment decisions.

557. My reasons for accepting Mr. Hapgood's submissions on this point are as follows:
558. In Peekay, all three judges were agreed that the provisions in the documentation gave rise to a contractual estoppel which contractually precluded the claimant from making assertions of fact to the contrary. This was in addition to and distinct from any question of estoppel by representation. Their reasoning was firmly rooted in, and consistent with, the importance of freedom of contract and contractual certainty. The particular clauses in that case concerned the question of understanding as to the nature of the instrument. That has direct relevance to certain of the allegations made by Springwell in the context of its misrepresentation claim. But the principle extends more broadly and, in my judgment, applies to any other form of contractual statement, for instance as to sophistication or non-reliance on advice generally. In each case, the parties are contractually free to determine the factual basis upon which they conduct business.
559. It is clear, contrary to Mr. Brindle's submissions, that the decision on contractual estoppel was indeed part of the ratio of Peekay: Thus, although Moore-Bick LJ did say that it was unnecessary to decide the question,^[145] he went on to do so, and then expressly stated that he allowed the appeal "… for these reasons too".^[146] Moreover, Chadwick LJ's decision on contractual estoppel was one of the three reasons he gave for concluding that the judge was wrong.^[147]
560. In such circumstances, it would be surprising if the unanimous reasoning of such a strong tribunal, in a decision which is fully consistent with underlying fundamental principles, did not represent the law. Indeed, subsequent authorities show that Peekay has been taken to represent the law on contractual estoppel.
561. Thus, for example, in Bottin International Investments v Venson,^[148] Blackburne J regarded himself as bound by it.^[149] It was also applied by Andrew Smith J in Donegal International v Republic of Zambia,^[150] where the judge held that an argument based on misrepresentation was simply not open to one of the parties in view of a clause in an agreement to the effect that there was no reliance on any statement or representation.^[151] Referring expressly to Moore-Bick LJ's judgment, Andrew Smith J said that "there is no reason that effect should not be given to this provision".^[152] The decision has also been followed by the Court of Appeal of Singapore in Orient Centre Investments v Societe Generale [2007] SGCA 24 (at paragraphs 51-53).
562. Nor do I accept that there is any inconsistency between Peekay and the line of authority running from Lowe v Lombank to Watford Electronics. There can be no question of the decision in Peekay being given per incuriam or without knowledge of the previous case law: Moore-Bick LJ was obviously aware of Grimstead v McGarrigan because he referred to it in his judgment;^[153] Chadwick LJ was obviously aware of both Grimstead v McGarrigan and Watford Electronics because he gave the leading judgment in both those cases; Lowe v Lombank was cited (by Chadwick LJ) in both Grimstead v McGarrigan^[154] and Watford Electronics.^[155]
563. Second, the contractual estoppel argument of Peekay is not in any way inconsistent with the analysis of estoppel by representation. As Mr. Hapgood submitted, they are different forms of estoppel with different jurisprudential bases. This was recognised by Moore-Bick LJ in his judgment in Peekay, and he considered both separately.
564. Third, I do not consider that, on a proper analysis, there is any inconsistency with either the decision or the reasoning in Lowe v Lombank. As I have already explained, the relevant point in Lowe v Lombank has to be viewed in its relevant statutory and factual context. In that case, the written document recording a mere statement as to past facts could not as a matter of language amount to a contractual promise. But Diplock J himself drew a distinction between such a statement as to past facts and:

"a promise by the promisor to the promisee that acts will be done in the future or that facts exist at the time of the promise or will exist in the future". (My emphasis)

The analysis in Peekay is consistent with this analysis: what is envisaged, as described by Moore-Bick LJ, is an agreement "that a certain state of affairs should form the basis for the transaction".^[156] That is undoubtedly capable of amounting to a contractual promise and Lowe v Lombank does not appear to suggest the contrary, as indicated by the passage underlined above, even though I have some difficulty in seeing the distinction between a "a statement as to past facts" and a statement that "facts exist [or do not exist] at the time of the promise". Be that as it may, it would be surprising if the result were otherwise: parties must always be able to determine the basis upon which they conduct business.

565. Moreover, as Mr. Hapgood submitted, this analysis is also consistent with the judgment of Rix J (as he then was) in Deepak Fertilisers v ICI .^[157] In that case there was an entire agreement clause, which provided that:

"there are not any agreements, understandings, promises or conditions oral or written, expressed or implied, concerning the subject matter which are not merged into this contract and superseded hereby".

Rix J held (in what was, in effect, a precursor to the Peekay analysis) that such a clause was not, as a matter of construction, apt to exclude a claim in misrepresentation, but that it did, as a matter of construction, exclude any claims for breach of collateral warranties.^[158] He relied on an unreported decision to similar effect of Browne-Wilkinson J. The claimant contended (in a manner very similar to Springwell) that Browne-Wilkinson J's decision had been per incuriam because it was expressed in ignorance of Lowe v Lombank and that, based on Lowe v Lombank, a clause such as this could only take effect as an estoppel by representation. Rix J rejected this argument,^[159] concluding that Lord Diplock in Lowe v Lombank was "speaking in a wholly different context". Further (and in language similar to Peekay), he continued:

"I do not see why parties to a contract are not perfectly capable of agreeing what are and what are not the terms of any contract binding on them. That after all is essentially what parties seek to do, more or less successfully, when they agree to reduce their agreements to writing".

566. In conclusion on this topic, I see nothing inappropriate or commercially offensive about Chase being permitted to rely on the statements contained in the Relevant Provisions, even if it could be said that in some respects they did not accurately reflect every aspect of the dealing relationship. All of the relevant terms of the contractual documentation fall squarely within the Peekay analysis, as contractual representations (and in some cases, warranties) or "agreements" as to the basis upon which the business was to be conducted. Thus, for example, where the contract provided that, by placing an order, Springwell represented (clause 4 of the 1997 DDCS letter)^[160] that it was a sophisticated investor and that it had independently and without reliance on Chase made a decision to acquire the instrument, that was not a mere statement of historical fact, but a contractual representation forming the agreed and binding basis upon which the parties would transact every future purchase. The same analysis applies in respect of every clause in every document to which Springwell takes this objection. The fact that some statements are expressed in the language of representation or acknowledgement cannot, in my view, make any difference to the analysis that the statements give rise to a contractual estoppel.
567. Nor do I accept Mr. Brindle's submissions that contractual estoppel cannot be utilised to enable the parties to agree that they will deal with each other, going forward, on the basis that no advice should be deemed to have been given. Of course, JA was well aware, for example, that he had made recommendations as to the advisability of purchasing the Failed Notes (i.e. the GKO-Linked Notes). That, in my judgment, does not prevent a contractual estoppel from arising.
568. Even if, contrary to my conclusion, Chase has to rely on estoppel by representation, the three limbs of the test are adequately satisfied to permit it to do so. Thus, the terms of the Relevant Provisions are clear and unambiguous. By signing the various documents, Springwell so conducted itself that a reasonable person in the position of Chase would take the representation to be true and believe that Springwell intended that Chase should act upon it. On my findings of fact, Chase did, at least to a certain extent, believe the representations to be true, and was induced by such belief to act upon them. At the time the relevant documents were signed, Chase did believe that Springwell was a sophisticate and experienced investor which was fully capable of making, and did in fact make, its own decision on every purchase that it made. Although Chase knew that JA was giving AP advice (in the nature of recommendations and opinions based on Chase research materials) and that AP relied on such advice in reaching his investment decisions, it knew that AP would in fact always make his own decision as to whether to invest or not. Further, Chase in fact thought that Springwell did not look to Chase as an investment advisor, and did not consider that Chase was its investment advisor. Thus the representations in one sense reflected Chase's own view of the reality. Certainly it acted in reliance on those beliefs, because it would not have traded with Springwell had Springwell not signed the documents. But if Chase (contrary to the above view), in order to satisfy the requirements for estoppel by representation, has to show that it did not believe that AP relied at all on any of JA's advice in coming to his investment decisions, then I conclude that it would fail to establish estoppel by representation.

Can Springwell avoid the apparent effect of the Relevant Provisions on other grounds

569. Springwell's third attack on the contractual documents is to seek to avoid them through reliance on one or more of the following legal principles:

i) breach of fiduciary duty;

ii) the application of the principle in Interfoto v Stiletto;

iii) misrepresentation;

iv) unilateral mistake;

v) estoppel by convention;

vi) the application of relevant provisions of the Unfair Contract Terms Act 1977 ("UCTA") or the Misrepresentation Act 1977 ("the 1977 Act").

570. Before considering the detailed arguments raised by Springwell under each of these specific sub-headings, it is necessary to emphasise certain aspects of the arguments generally in this section. First, no case was based on an allegation of non est factum. Second, it was not suggested that Chase positively misrepresented the terms of any of the contractual documents. Third, the thrust of Springwell's arguments under each head was that the contractual documentation was inconsistent with the alleged advisory relationship as it operated in practice. Fourth, it is clear that all the arguments are related or factually inter-dependent.

Breach of fiduciary duty

571. Springwell contended that Chase's relationship with it also gave rise to fiduciary obligations on the part of Chase. Mr. Brindle submitted that, although the relationship of investment advisor and client is not one of the categories of relationship where a fiduciary relationship will simply be presumed by the law, the present case was one where, on the facts, such a relationship arose. Mr. Brindle relied, in particular, on Daly v Sydney Stock Exchange^[161]; Woods v Martin's Bank^[162]; Bristol & West v Mathew^[163]; and Murad v All-Sarry^[164] and various academic writings including the Law Commission's 1992 Consultation Paper on Fiduciary Duties and Regulatory Rules.
572. Springwell's reliance upon an alleged fiduciary duty and a breach of Chase's fiduciary obligations was potentially relevant to three different aspects of its case. First, it alleged that there was a positive fiduciary duty to disclose all material facts in the contractual documentation and explain such documentation to Springwell; this went to Springwell's allegations that Chase could not rely on the Relevant Provisions in the contractual documentation^[165]. Second, Springwell alleged that Chase owed a duty of disclosure before it made an "unusually large profit at Springwell's expense"^[166]. This was potentially relevant to Springwell's claim for an account. Third, general allegations were made of a duty of good faith on the part of Chase, with related obligations to avoid conflicts of interest and to disclose interests in various transactions. These general allegations went to certain allegations that Chase acted improperly in various ways.^[167]
573. There is no need for me to conduct a meticulous rehearsal of the relevant authorities or to repeat the relevant facts relating to Springwell's relationship with the Private Bank and the Investment Bank. In the absence of any contractual agreement for Chase to provide investment advisory services to Springwell, or any common law acceptance of an obligation to do so (as I have found the position to be), I do not see how what was essentially a commercial banking relationship between Chase and Springwell could give rise to the extensive fiduciary obligations on the part of Chase contended for by Springwell. In effect, Springwell relied on the same facts to support it case that Chase owed investment advisory obligations as it did to support the existence of a fiduciary relationship. Chase may, in its capacity as custodian of securities held for Springwell's account, have had certain limited fiduciary obligations, but this is a far cry from the wide-ranging fiduciary relationship which Springwell asserted. AP was well aware that certain Chase entities were counterparties to the transactions in which Springwell was involved, and had its own commercial interest in such transactions. Thus, the Investment Bank was counterparty to the Sale Transactions, and the Private Bank was custodian and lender. Many of the contractual documents specifically emphasised that Chase had or might have an interest in the relevant transactions. AP certainly relied upon, or "trusted" JA's views, recommendations and advice. He may have trusted EM, FS and others at Chase. But the mere fact that one party to a commercial relationship "trusts" the other does not predicate a fiduciary relationship. The word "trust", like the word "advice" has a variety of meanings. In a broad sense, trust is an important element in many commercial dealings. As Steyn J (as he then was) pointed out in Barclays Bank plc v Quincecare Limited ^[168]:

"… trust, not distrust, is also the basis of a bank's dealings with its customers …"

Springwell no doubt "trusted" Chase to conduct itself in a commercially appropriate manner. But I do not consider that Springwell had any legitimate expectation that, in its commercial dealings with Springwell, Chase would subordinate its interests to those of Springwell. Nor do I consider EM's assessment of his role as "essentially a fiduciary one" as any assistance in this context. The correct characterisation of the relationship is a matter of law.

574. In conclusion, I do not consider that there is anything in Springwell's relationship with Chase that imposed the alleged extensive fiduciary obligations on either the Investment Bank or the Private Bank as Springwell's commercial counterparties.
575. As Lord Mustill said in Re Goldcorp:^[169]

"No doubt the fact that one person is placed in a particular position vis-a-vis another through the medium of a contract does not necessarily mean that he does not also owe fiduciary duties to that other by virtue of being in that position. But the essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself. Their Lordships have not heard in argument any submission which went beyond suggesting that by virtue of being a fiduciary the company was obliged honestly and conscientiously to do what it had by contract promised to do. Many commercial relationships involve just such a reliance by one party on the other, and to introduce the whole new dimension into such relationships which would flow from giving them a fiduciary character would (as it seems to their Lordships) have adverse consequences far exceeding those foreseen by Atkin L.J. In re Wait [1927] 1 Ch. 606. It is possible without misuse of language to say that the customers put faith in the company, and that their trust has not been repaid. But the vocabulary is misleading; high expectations do not necessarily lead to equitable remedies."

576. Accordingly, I do not consider that Chase had any fiduciary obligation, whether arising out of an alleged fiduciary relationship or the so-called fair dealing rule or otherwise to explain the terms of the contractual documentation to Springwell. The purpose of that documentation was to define and delineate the basis of the relationship between Springwell and Chase, and the services which the latter was to provide. The documentation was not, upon my analysis, at any stage attempting to undermine or modify an existing fiduciary relationship. It follows that I reject Mr. Brindle's submission that the documents purported radically to change the nature of the relationship between Springwell and Chase, and that presenting documents for signature without drawing the changes specifically to AP's attention was an abuse of the confidence which AP placed in Chase. Accordingly, I reject Springwell's attempt to avoid the contractual documentation on this ground.
577. I also reject Springwell's alternative argument that even if there was no fiduciary relationship, Springwell would still be entitled to have the Relevant Provisions set aside on the grounds that "because of the trust and confidence that AP placed in Chase, Springwell was, on any view, in a position of vulnerability". In my judgment, there is no room in the factual context of the present case for the operation of principles analogous to those of undue influence.

Interfoto v Stiletto

578. As to its next ground for seeking to avoid the Relevant Provisions, Springwell relies on the principle articulated by Bingham LJ (as he then was) in Interfoto v Stiletto^[170]. Mr. Brindle contended that:

"… in the context of an advisory relationship freely established by Chase, the Relevant Provisions were unusual and onerous in that they purported to empty the advisory undertaking of any content. This required that they be drawn very clearly to Springwell's attention. … Chase did not do anything to draw the Relevant Provisions to Springwell's attention. That was plainly insufficient in the circumstances. Accordingly, and under the Interfoto principle, it should not be entitled to enforce them."

579. Although Springwell's pleaded case only appeared to make the allegation in respect of the GKO-Linked Noted confirms^[171], Mr. Brindle's written opening submissions appeared to extend to all the Relevant Provisions., although no additional documents were expressly mentioned. As Mr. Hapgood pointed out, this is more than a mere technical point, as the relevant principle necessitates a consideration of whether any relevant clause is "particularly onerous or unusual". Strictly speaking, that is a matter which would have to have been considered, if applicable, on the evidence, and if necessary by expert evidence. It was not so addressed in the evidence at trial. I nonetheless consider the argument as applied to all the Relevant Provisions.
580. In Interfoto, the two Lord Justices approached the issue somewhat differently. Dillon LJ held that what he regarded as an unusual and onerous clause had not become part of the contract as it had not been brought to the defendant's attention. Bingham LJ, on the other hand, held that the defendant was to be relieved of the liability to pay under what he regarded as an "unreasonable and extortionate clause" because the plaintiff did not do what was necessary to draw it to the defendant's attention.
581. Bingham LJ said, at page 445:

"The tendency of the English authorities has, I think, been to look at the nature of the transaction in question and the character of the parties to it; to consider what notice the party alleged to be bound was given of the particular condition said to bind him; and to resolve whether in all the circumstances it is fair to hold him bound by the condition in question. This may yield a result not very different from the civil law principle of good faith, at any rate so far as the formation of the contract is concerned.

…

… The defendants are not to be relieved of that liability because they did not read the condition, although doubtless they did not; but in my judgment they are to be relieved because the plaintiffs did not do what was necessary to draw this unreasonable and extortionate clause fairly to their attention. I would accordingly allow the defendants' appeal and substitute for the judge's award the sum which he assessed upon the alternative basis of quantum meruit."

582. The subsequent authorities show that, in the absence of any general duty under English law to negotiate in good faith, and, in the interests of commercial certainty, the application of this principle is necessarily very restricted. Commenting on Interfoto in HIH Casualty and General Insurance v New Hampshire Insurance Co,^[172] Rix LJ observed that:

"The term was described as 'very onerous' (at p438F), and 'unreasonable and extortionate' (at p445H). The Court of Appeal was even concerned that it might have been an unenforceable penalty (at pp436C, 445H-446A), but that point was not argued."

583. The view of Rix LJ in HIH was that the principle simply did not apply at all in the case of any signed contracts:

"Interfoto v Stiletto was not concerned with the effectiveness of an incorporation clause in a signed contract, which is essentially a question of construction, but rather with a question of notice: the question of whether sufficient notice has been given to a person by means of a document which has not been signed so as to render that person contractually bound by the term or terms set out in that document." ^[173]

584. However, the point whether the principle could ever conceivably apply to signed contracts has not been conclusively determined. In Amiri Flight Authority v BAE Systems,^[174] Mance LJ left open the possibility that there might be some unusual types of contract to which the principle might apply, and referred to "… a provision of an extraneous or wholly unusual nature"; but these are very far removed from the present case. Equally, in Ocean Chemical Transport Inc v Exnor Craggs,^[175] Waller LJ seemed prepared to assume (although it did not matter for his judgment) that the principle might apply to a signed contract in "an extreme case". I also refer to Lacey's Footwear v Bowler^[176].
585. Whatever the precise scope of the principle, I conclude that it must, on any basis, have a very limited application to signed contracts between commercial parties operating in the financial markets. I certainly do not consider that it applies in the circumstances of the present case, even though, as I have found, many, if not most, of the Relevant Provisions were not expressly drawn to Springwell's attention. In my judgment, none of the Relevant Provisions in any of the contractual documentation here could be characterised as "particularly onerous or unusual^[177]", let alone "unreasonable" or "extortionate". Certainly Springwell had not adduced any market or expert evidence to support such a characterisation.
586. What the Relevant Provisions did was to confirm, in various ways, that Chase was not providing investment advice to Springwell in its decision to purchase emerging markets investments, and was not assuming any liability for any advice which it did provide. Nor were the Relevant Provisions unusual. They were routine, standard form and normal provisions in contractual documents of this kind. Indeed, many of the terms were contained in very similar contracts provided by other banks, which Springwell or the Polemises happily signed. For example:

i) The MFA was a standard contract drafted by Chase for the margin forward program. After the default, another Polemis corporate investment vehicle signed a document containing broadly similar provisions with SBL.

ii) The GMRA was an industry standard (PSA) document and Springwell signed the same document with ML.

iii) The DDCS Letters were standard documents designed by Chase compliance department. Further, the drafting of the letters was consistent with the SFA's guidance. Mr Saunders gave evidence that it was standard banking practice to require a customer to sign such a letter if he wishes to trade in particular fields. Again, Springwell signed a similar document with ML.

587. Mr. Hapgood also legitimately relied upon the sheer number and regularity of the documents which were routinely provided to Springwell to sign, including several copies of the confirms. In my judgment, Chase did enough to bring home to Springwell the overall thrust of the contractual documents by repeatedly requiring signatures from Springwell. Ultimately, the responsibility for Springwell's choice not to bother to read, or to read with sufficient attention, the Relevant Provisions (if indeed it did not do so) must be its own.
588. In Springwell's opening, it was suggested that its case was a fortiori in the context of the provisions in the GKO-Linked Notes, because the Notes had never been received by Springwell. However, as I have already held, and as, indeed, Springwell belatedly accepted, the Notes were indeed received by Springwell.

Misrepresentation

589. Springwell also sought to avoid the contractual documentation on the grounds of Chase's misrepresentation. This was allegedly based on Chase's silence or conveyance of half-truths in failing to explain the scope and effect of the Relevant Provisions to AP in circumstances where, Springwell alleged FS knew that AP would not read contractual documents, at least in any detail, before signing them; and that AP trusted FS not to put before AP, and make him sign, anything that was prejudicial to Springwell without explaining it to him. In particular, Springwell relied upon the circumstances surrounding the signing of the MFA, the GMRA and the 1993 and 1997 DDCS Letters. This argument was also heavily dependent upon Springwell's case (which I have rejected) that Chase had a fiduciary relationship with Springwell, giving rise to extensive fiduciary obligations. Mr. Brindle relied upon the statement of the relevant principle by Bingham J in The August Leonhardt^[178]. Accordingly, it was submitted that Chase was disentitled from relying upon the Relevant Provisions.
590. My findings on the facts, and my conclusion adverse to Springwell's case based on fiduciary obligations, do not support any such basis for avoiding the Relevant Provisions. Although it is clear that FS and JA were well aware that AP did not as a rule read documents in any great detail before signing them (and indeed the transcripts show that FS was somewhat concerned about this), an analysis of the circumstances in which the documentation came to be signed, as set out above in the narrative section of this judgment, does not support a case that the meaning and effect of individual clauses or the entire document was misrepresented to AP or Springwell, whether by a partial explanation or silence. The main reason for FS' reluctance to go into any detail in his explanations was, I have no doubt, largely based on AP's obvious impatience with formalities and irritation at being faced with legal documents to sign. But, as I have described, FS did at least explain the commercial effect of the documents and introduce them in broad terms. Moreover, given the sheer number of contractual documents and confirmations, and the obvious importance that Chase attached to them, Springwell cannot realistically assert that, in the absence of a full explanation from Chase, it is not bound by any of their terms.
591. I also have no doubt that, if all the terms of the various contractual documents had indeed been fully and carefully explained to AP, he would, in the circumstances, have signed them in any event. On any basis, he knew that access to the Investment Bank's trading desk in emerging markets and the Private Bank's financing programmes was dependent upon his doing so. Accordingly, for those reasons, I reject Springwell's case that Chase is not entitled to rely on the Relevant Provisions on the grounds of any alleged misrepresentation.

Unilateral Mistake

592. The case put forward by Springwell under this head is that Chase "must have known or shut its eyes to the fact that Springwell cannot have intended to vary is relationship with Chase" in the manner purported by the Relevant Provisions (in particular that Chase would ceased responsibility for advising) and cannot therefore have understood that the documents contained any provisions purporting to have that effect. Reliance in this context was placed on the Court of Appeal's statement of principle in Hurst Stores v ML Europe^[179].
593. This argument fails not least because I have concluded that there was no original contract or relationship between Chase and Springwell under which the former assumed legal responsibilities to give general or specific investment advice to the latter. It would also fail on the basis that, whatever may have been the extent of AP's comprehension of the Relevant Provisions, he was not "mistaken" as to their terms. Moreover, as I have already explained, the Relevant Provisions did not prevent JA from doing what he had always done; giving information, advice and recommendations to Springwell about emerging markets investments, or the state of the market. All the Relevant Provisions did was to define the Investment Bank and the Private Bank's trading relationship with Springwell, so that their dealings were conducted on the basis (whether assumed or actual) that no investment advice was being given by any Chase entity for which it could be held responsible.
594. Nor was there any basis for the allegation that Chase had "knowledge" of Springwell's alleged mistake. The requirements for setting aside a contractual provision on the grounds of unilateral mistake are very strict; see per Lightman J in Rowallan Group v Edgehill Portfolio Ltd^[180]. There are certainly no grounds for invoking such a "drastic remedy"^[181] in the circumstances of the present case.

Estoppel by convention and representation

595. Springwell's argument under this head is that, because Chase, by JA, did continue to make recommendations and give advice and opinions to AP:

"Chase is estopped by convention, alternatively by representation, from asserting the contrary and from relying upon the Relevant Provisions to deny the advisory relationship and its consequences."

596. In my judgment, this argument also fails. It misses the point. The Relevant Provisions did not, as I have already explained, prevent AP from continuing to receive the benefit of JA's (or Chase's) research or advice in relation to emerging markets, or the investments which the Investment Bank had to sell. The Relevant Provisions were simply defining the parties' respective rights and obligations, so that the agreed basis of the parties' trading relationship was that Chase would not have legal responsibility for any such advice or information as might have been given, and was not to be regarded as giving, or being obliged to give, any general or specific investment advice to Springwell. Thus, the fact that JA continued to act in the way in which had done previously, or that AP continued to seek JA's advice and recommendations, and relied upon them, in making his investment decisions, does not, in my judgment, support a case:

i) that Chase made any representations to Springwell that the Relevant Provisions should not be relied upon;

ii) that Springwell acted reasonably in so doing; or

iii) that there was any common understanding that the Relevant Provisions in the contractual documentation should be ignored. As I have already found, at the time, AP never considered (until well after the Russian default) the issue of Chase's supposed legal responsibility for anything said by JA.

The Unfair Contract Terms Act 1997/the Misrepresentation Act 1967

597. Finally, and very much by way of last ditch argument, Springwell sought to avoid the Relevant Provisions on the grounds that they variously fell within the scope of UCTA and section 3 of the 1967 Act. Mr. Brindle submitted, therefore, that the burden fell on Chase to establish that the Relevant Provisions satisfied the statutory test of reasonableness which, he contended, they did not. He argued that:

"[i]n so far as the Relevant Provisions sought to exclude liability indirectly (by, for example, disclaiming an advisory relationship or the fact of advice having been given or the fact of it having been relied upon), they purported to empty Chase's freely assumed obligation to advise of any force and to effect a significant reallocation of risk as between Chase and Springwell without any corresponding reallocation of reward and without drawing the fact of the attempted reallocation to Springwell's attention so that Springwell was in ignorance of it."

He relied, in this context, upon a passage from Firth's Law of Derivatives at paragraph 4.024, where the following is stated:

"… the more extensive the advisory relationship, the less reasonable a provision denying the existence of such a relationship is likely to be. Where, for example, there is a relationship of banker and customer and the customer is clearly looking to the bank for recommendations about the appropriate course of action, it would probably not be sufficient simply to include a provision in the transaction documentation claiming that no advice has been given. If the bank wishes to avoid being held to have assumed responsibility for giving such advice, and the potential liability that goes with it, it probably needs to do much more than this to ensure that the customer understands the true nature of the relationship."

598. He also argued that in so far as the Relevant Provisions sought to exclude liability directly (in particular the last sentence of Paragraphs 4 and 6 of the DDCS Letters and Clause 6 (b)(iii) of the MFA), similar considerations applied.
599. As is apparent from the documents themselves, they comprise various types of clause. There is a small number of genuine exclusions clauses (see, in particular, the last sentence of paragraph 4 and the last main clause in the last sentence of paragraph 6 of the DDCS letters). The bulk of the terms, however, were not exclusion clauses but merely clauses which defined the nature of the services which Chase was rendering to Springwell and which confirmed the basis on which the parties were transacting business.
600. By section 2(2) of UCTA, a person cannot exclude or restrict his liability for negligence (as a business liability) except insofar as the term or notice satisfies the requirement of reasonableness. By section 13, this includes clauses which make the liability or its enforcement subject to restrictive or onerous conditions, or exclude or restrict any right or remedy in respect of the liability. Section 3 of the Misrepresentation Act extends the ambit of the legislation to clauses which purport to exclude liability for misrepresentation.
601. I accept Mr. Hapgood's submission that most of the provisions within the contractual documentation do not fall within the scope of this legislation. There is a clear distinction between clauses which exclude liability and clauses which define the terms upon which the parties are conducting their business; in other words, clauses which prevent an obligation from arising in the first place. In Tudor Grange Holdings v Citibank, Sir Richard Scott, V-C stated that:

"The Act of 1977 is normally regarded as being aimed at exemption clauses in the strict sense, that is to say, clauses in a contract which aim to cut down prospective liability arising in the course of the performance of the contract in which the exemption clause is contained."^[182]

602. Thus terms which simply define the basis upon which services will be rendered and confirm the basis upon which parties are transacting business are not subject to section 2 of UCTA. Otherwise, every contract which contains contractual terms defining the extent of each party's obligations would have to satisfy the requirement of reasonableness. A good example of this approach is to be seen in IFE v Goldman Sachs,^[183] where the claimants sought to characterise all of the relevant terms, upon which reliance was placed, as exclusion clauses and thus open to challenge under the legislation. However, Toulson J concluded that they should not be characterized as a notice excluding or restricting a liability for negligence, "but more fundamentally as going to the issue whether there was a relationship between the parties (amounting to or equivalent to that of professional advisor and advisee) such as to make it just and reasonable to impose the alleged duty of care". The Court of Appeal, as already indicated, took exactly the same approach, in characterising the clauses as determining the basis of the relationship between the parties. ^[184]
603. The legislation is, in practice, of very limited application in the case of commercial contacts between commercial counterparties. In Photo Productions Ltd v Securicor,^[185] Lord Wilberforce said that, in commercial matters generally, when the parties were not of unequal bargaining power, Parliament's intention was one of "leaving the parties free to apportion the risks as they think fit… and respecting their decisions."^[186] Tuckey LJ made the same point in Granville Oil & Chemicals v Davis Turner & Co^[187]:

"For these reasons I think the Judge reached the wrong conclusion in this case. If necessary I would say he was plainly wrong. I am pleased to reach this decision. The 1977 Act obviously plays a very important role in protecting vulnerable consumers from the effects of draconian contract terms. But I am less enthusiastic about its intrusion into contracts between commercial parties of equal bargaining strength, who should generally be considered capable of being able to make contracts of their choosing and expect to be bound by their terms."

604. The reluctance of the Courts to interfere in contracts concluded between commercial parties in relation to substantial transactions reflects the strong business need for commercial certainty, as emphasised by Chadwick LJ in EA Grimstead & Son Ltd v McGarrigan^[188] (supra).
605. In my judgment, even to the extent that the Relevant Provisions in the contractual documentation fall within the scope of the legislation, such terms cannot, in the context of the dealings between Chase and Springwell, be characterised as unreasonable. On the contrary, they were reasonable. In coming to this conclusion I take into account:

i) These were substantial contracts between commercial counterparties of equal bargaining power. As I have already held, Springwell had absolutely no need to continue to trade with Chase. It did not need to trade in the emerging markets at all but, if it wished to do so, it could trade with other competitor banks (and, indeed, did so, with ML).

ii) None of the terms of the contractual documentation was intrinsically unfair or unreasonable. They merely defined and delineated the terms upon which the parties were prepared to do business and in fact did business. None of the exclusions of liability (including the exclusion clause in the DDCS Letters) could be characterised, in context, as unduly harsh or unreasonable.

iii) Many of the documents were standard documents (whether standard within Chase or standard within the market) and, indeed, many of the terms were contained in other contracts signed by Springwell. The expert evidence supported the proposition that these were standard market terms.

606. The thrust of Springwell's case was not that any of the contractual terms were inherently unreasonable, but rather, based upon the passage cited from Firth, supra, that it was unreasonable for Chase to seek to contract on such terms, given the allegedly existing advisory relationship, without a full explanation. In other words, the complaint was not really as to the alleged unreasonableness of the terms of the Relevant Provisions, but, rather, as to the circumstances in which Springwell came to sign up to them. I have rejected Springwell's allegation that Chase assumed obligations to give investment advice from the date of Springwell's initial introduction to JA. I do not consider that the fact, per se, that JA continued to provide information and gave recommendations, advice and opinions to AP, in the way which I have described, meant that it was unreasonable for Chase to have included the Relevant Provisions or to rely upon them. Nor does the passage in Firth provide any real support for the characterisation of such standard provisions governing trading relationships in the financial markets as unreasonable; certainly it does not do so in the circumstances of this case.
607. Accordingly, in my judgment, Springwell's case under this head also fails.

Conclusions on issues 1.1, paragraphs 2-4

608. It follows that I conclude, in answer to the issue defined at paragraph 4 of the List of Issues, that:

i) Neither CMB, CIBL nor CMIL contracted to advise Springwell as to appropriate investments and thus none of them owed any contractual duties of care in this respect;^[189]

ii) Neither CMB, CIBL and CMIL owed tortious duties of care to Springwell to give investment advice or in giving investment advice. In all the circumstances, it would be neither fair, just or reasonable to impose such a duty.

If Chase did owe any duty, what was the ambit of any duties owed?

609. In the light of the conclusions which I have reached in relation to the issue defined at paragraph 4 of the List of Issues, the issue defined at paragraph 5, (namely the question whether, if Chase owed contractual and/or tortious duties of care to Springwell, what was the ambit of the duties owed), does not arise for determination. Indeed, having reached my earlier conclusions, it is somewhat artificial, to say the least, to attempt do express my views as to what would be the scope of such duties, on the assumed basis that I were wrong in my earlier conclusions. That is because, necessarily, one's views as to the scope of any such duties as might be owed on that hypothesis are informed by one's conclusions as to the nature of the relationship between the parties. Furthermore, as I have already indicated, the experts were also agreed that the precise scope of any obligations owed depended on the facts of the particular case and the nature of the relationship. Thus, as Mr Hapgood submitted, in the absence of some uniform obligation arising out of every relationship, the particular incidents of any duty will depend on the circumstances of the case, rather than on generalities opined in expert evidence
610. However, since the matter was addressed at some length by the experts, I should perhaps briefly express my views, on the assumed basis (a) that I am wrong in my earlier conclusion that, in the circumstances, no legal responsibility was assumed by Chase to give investment advice to Springwell, and (b) that Chase did indeed owe some duties of care to Springwell, arising out of its relationship with the Private Bank and/or JA's dealings with AP.
611. Springwell's case, as set out in Section 6.3.1 of its written opening argument, paragraph 74 et seq. of the RADC (as quoted earlier in this judgment), and in Section 3 of Mr Dicker's expert report, was to the effect that, where a client looks to an advisor for advice on investments and on its portfolio as a whole, discharging such a relationship requires the advisor:

i) to determine and document the extent of the client's investment expertise, investment objectives and attitude to risk;

ii) to communicate to the client the advisor's understanding of the client's investment expertise, investment objectives and attitude to risk and ensure that the client confirms that understanding to be correct;

iii) to undertake regular reviews of the client's investment objectives and attitude to risk so as to identify any changes and accurately record the results of such reviews (with confirmation from the client that the advisor's revised understanding is correct);

iv) to formulate and document an appropriate investment strategy and asset allocation plan and obtain the client's agreement to it;

v) to advise the client as to the appropriateness of particular investments and the portfolio as a whole, given the client's investment objectives and attitude to risk and the agreed investment strategy;

vi) to explain to the client the risks associated with particular investments and within its portfolio as a whole;

vii) to advise the client as to the need to sell or as to suitable opportunities to sell investments in the portfolio;

viii) regularly to review the client's portfolio as a whole against its investment objectives and attitude to risk and against the agreed investment strategy;

ix) to advise the client of any divergence between the portfolio it holds and its investment objectives, attitude to risk and agreed investment strategy and how best to rebalance the portfolio to bring it back in line;

x) to advise the client as to whether or not leverage is appropriate and, if so, as to the risks of leverage and how it should be deployed.

612. Even if I were wrong in my earlier conclusions, and some legal responsibility was assumed by Chase to advise Springwell, I reject Springwell's argument that it necessarily followed that, in the circumstances, Chase owed the full panoply of what were referred to as the "core obligations" listed above. The obligations that were owed must depend on what one party expressly, or by implication, has asked for, and what the advisor, expressly or by implication, has agreed to provide. This was not, on any basis, as I have held, a situation where Springwell was asking for, or expecting to receive, extensive general investment advisory services of the type listed above.
613. I agree with Mr Hapgood's submission that the problems with Mr Dicker's approach were as follows:

i) It was not based on any industry guidance or rule, or derived from any other objective source, but rather reflected the approach that Mr Dicker said were taken in the institutions in which he worked.

ii) The so-called minimum requirements were really a means by which a party might seek to discharge such obligations that he owed, rather than a statement of the core obligations. Thus, for example, it might be good practice for an advisor to document "an appropriate investment strategy/asset allocation plan", but it could hardly be said to be a core obligation in itself, particularly if the client does not want such a plan. Given, in particular, that levels of practice undoubtedly tightened up, in line with increasing regulation during the 1990s, the distinction between a core obligation and a means of practice to discharge an obligation, was an important one.

iii) The approach failed to give recognition to the infinite variety of circumstances which present themselves in an advisory relationship. Ultimately, as both experts agreed in their oral evidence, the existence and scope of any duty is always dependent on the facts of the case, and in particular what the client says that he wants from his advisor. Any search for core obligations must reflect this fundamental reality.

614. I accept Mr Saunders' evidence as reflecting the reality of the position. As he said:

"There is no one type of advisory portfolio as clients vary enormously in what they require from a bank… portfolios are often driven by passing ideas, clients' wishes, product availability etc, resulting in quite skewed portfolios which aim off from a conventional portfolio structure in a big way".^[190]

615. In my judgment, in deciding what, if any, obligations Chase owed Springwell on the stated hypothesis, one needs to look at the key factors (irrespective of the Relevant Provisions, which, on this hypothesis, have dropped out of the picture.) These include:

i) AP's knowledge that JA was concerned only with emerging markets; in such circumstance, I agree that it cannot credibly be suggested that JA owed some general duty to advise, or that AP relied upon JA to advise, about other types of investment;

ii) the fact that AP himself often raised particular instruments or countries with JA and instructed him to source particular instruments or particular types of instrument; in such circumstances, the scope of any duty, if there was one, was a narrow one: to comply with his customer's request;

iii) that Springwell's portfolio was invested exclusively in emerging markets and that Springwell did not have any substantial investments outside emerging markets;

iv) the clear direction that AP gave as to where his interests lay (i.e. to invest in cheap high-yielding emerging markets instruments);

v) the pressure that AP placed on JA to find assets in which he was interested in order that Springwell remain fully invested;

vi) the regularity of the occasions on which AP spoke to JA and the immediacy with which JA was required to find assets for AP;

vii) the informal nature of the dealings between JA and AP;

viii) the frequent instructions by AP to JA to find assets that met particular criteria, such as assets in particular countries or assets that were "cheap" and afforded high yields; and

ix) the obvious reluctance of AP to consider selling assets which Springwell had purchased.

616. I conclude that the high water mark of Springwell's case, on the assumption that, contrary to my primary conclusion, some duties of care were owed by Chase to Springwell, is that Chase (and, for present purposes, I do not need to distinguish between the Private Bank and the Investment Bank) owed Springwell the following limited duties:

i) to take reasonable care to understand the client's investment objectives and attitude to risk over the course of the relationship;

ii) to take reasonable care to present investment opportunities which were in accordance with the client's investment objectives and attitude to risk;

iii) to take reasonable care to explain why the opportunities were being presented and to provide such information as appeared appropriate and helpful to enable the client to make an informed choice;

iv) to take reasonable care to provide accurate prices, so as to enable the client to make its own decisions as to when to sell;

v) arising out of the circumstances of the relationship between CMB and Springwell, as it developed over the period 1996-1998 and the situation with which it was faced, namely a client with an increasingly large exposure in emerging market debt securities, concentrated in Russia, to advise Springwell, that, given the size of its emerging markets portfolio, and its country concentration, it would be prudent to diversify a proportion of its funds out of emerging markets across a wider asset class;

vi) to take reasonable care that, in accordance with the client's investment objectives and attitude to risk, the portfolio within emerging markets was suitably diversified..

617. As to the second limb of the issue identified at paragraph 5 of the List of Issues, I have already concluded that the regulatory background (namely the SIB Statements of Principle, the SFA Rules, the Private Customer/Non-Private Customer distinction and the Grey Paper regime/London Code of Conduct) did not, save to the extent that I have mentioned above in relation to the DDCS Letters, significantly impact on my analysis of the relationship between Chase and Springwell and of the issue as to whether Chase owed Springwell investment advisory obligations. As I have already said, the fact that Chase did not owe Springwell duties as a private customer did not predicate what, if any, duties Chase owed Springwell as a non-private customer, whether as a matter of contract or at common law.

Section III: General Advisory Claim – Issue 1.2: Breach

618. It follows from my conclusion that Chase owed no duties to advise Springwell, that issues of breach are strictly academic.
619. However, even on the alternate assumption that Chase owed Springwell the limited duties of care which I have set out above in the previous section of this judgment, I conclude that Chase was not in breach of such duties of care which, on this hypothesis, it owed. Accordingly, I determine the issues raised at paragraphs 6 – 12, under Issue 1.2 adversely to Springwell. I set out my reasons in very short form, although the material upon which they are based is extensive.
620. First of all, I find as a fact that Springwell's pleaded investment objectives and its alleged attitude to risk, both in their original form, and in their revised, amended form, were constructs of fantasy which bore no relation to reality. Initially Springwell pleaded an exaggerated, and wholly incredible, case; first that, throughout the period concerned, it had two investment requirements, namely capital preservation and liquidity; second, that Springwell ought to have been classified as an investor with a "conservative attitude to risk for whom capital preservation and liquidity were the most important concerns"; third, that, if Chase had not been in breach of duty, it would have classified Springwell as such a conservative investor and would have advised Springwell only to purchase "high quality (investment grade) bonds and commercial paper" (with a small component in other instruments); fourth, that, if Chase had not been in breach of duty, then Springwell's portfolio would have comprised, for the most part "gilts, T-bonds, and other blue chip bonds". The rationale for the supposed investment objective was that, as alleged, AP knew from the early 1990s, that there would come a time when it was necessary to embark on a substantial ship building programme.
621. This was Springwell's pleaded case until 2006. It was consistent with the case which Springwell had pursued in the US Proceedings, begun in 1999. As Mr Hapgood submitted, the parameters described by Springwell in the US Proceedings, and in the present action until 2006, were stark. Springwell's description of itself was that of an investor at the most conservative end of the spectrum, which was interested in the most secure of investments, so as to ensure, as an overriding requirement, that its capital was preserved and that it retained full liquidity at all times.
622. In 2006, some eight years after the Russian default, Springwell changed its case. It alleged that, as the relationship with JA developed and as he came to trust JA, AP became willing "as a result of JA's failure to explain, and misrepresentation of, the risks involved" to invest part of the portfolio in investments which "were also subject to a risk of fluctuation". However, it remained his objective not to run any "appreciable risk" that the capital value might be reduced. Springwell also amended its case as to the portfolio which, it was said, Springwell should have acquired. This was amended to allege that the portfolio should have comprised the following (underlinings represent the new case):

"a. time deposits and/or gilts, T-bonds, and other blue chip bonds, together with

b. other fixed-income investments, possibly including emerging markets investments, and

c. managed funds…"

623. As Mr Hapgood submitted, the original case that the Polemises, who invested enormous sums aggressively and on a leveraged basis in the emerging markets for the best part of a decade, and who continued to do so whenever possible even after the Russian default, were at all times motivated only by the most conservative objective of keeping their money safe, was fanciful. I agree with him that the likely inference to be drawn is that, when it became clear that Springwell would have to give credit for profits earned on its investments, subject to the returns which it would have received on an alternative portfolio consistent with its investment objectives, it was in Springwell's interests to suggest a less conservative and higher yielding set of objectives, so as to justify a more aggressive alternative portfolio. No doubt that approach also reflected the obvious lack of attraction in Springwell's original pleaded case.
624. I have carefully considered the evidence relating to Springwell's objectives, not only at the start of its trading relationship, but also throughout its trading history, which I have set out in summary above. Whatever may have been Springwell's objectives at the start of its relationship with IFI, the clear picture presented on the evidence is that, by the start of the 1990s, AP was an extremely aggressive investor, who was very comfortable in the emerging markets, who consistently sought very high returns from the purchase of fixed income instruments in those markets and who was prepared to assume significant risk in order to do so.
625. In his evidence JA set out what he perceived to be Springwell's investment objectives and attitude to risk. He highlighted the following features:

i) a demand for full investment in the emerging markets;

ii) a strong desire for high yields;

iii) in general (subject to a change in relation to Prins) an interest in buying assets to hold until maturity;

iv) a general interest in the more liquid instruments but no overall policy of high liquidity;

v) a high risk tolerance and a preference for riskier, and higher yielding assets;

vi) a characteristic of opportunism, leading to a focus on low prices and to purchases at times of crisis, with a view to increasing overall yield.

626. The pattern of Springwell's investment history, as I have described above, in my judgment amply justifies this description of its objectives. Moreover, in cross-examination, when the relevant paragraphs of JA's witness statement were put to AP, he almost entirely accepted them as being accurate.
627. On the assumption that Chase (whether by the Private Bank, or by the Investment Bank) did owe the limited range of duties which I have set out above, I conclude that Chase was not in breach of those duties. In particular, I reject Springwell's allegations:

i) that JA failed to advise that the portfolio as a whole, or individual instruments within the portfolio, were not suitable for Springwell, having regard to its investment objectives and attitude to risk; and

ii) that JA failed to advise as to the risks of the investments which Springwell purchased or as to the risks of investing in Russia in general.

In so far as Springwell's case is based on positive statements, I deal with those under the misrepresentation claim.

628. In summary, I accept Chase's arguments on this part of the case. Thus, so far as the portfolio as a whole was concerned:

i) JA's conclusion that the portfolio was consistent with Springwell's investment objectives was shared by many of his supervisors, none of whom was in any way concerned that Springwell was being sold unsuitable products.

ii) Ms McLeod-Wilson, a highly experienced emerging markets saleswoman, who examined the portfolio in detail, concluded that it was comprised of standard emerging markets instruments of good quality, which were generally popular and attractive to investors with objectives similar to Springwell. Her conclusion, based on her experience, was that the portfolio was entirely consistent with Springwell's investment objectives as JA understood them. I accept this evidence.

iii) Specifically, although the portfolio had a heavy concentration in Russia (although this was reducing) and Brazil, this was consistent with the pattern of many emerging markets investors at the time, who chased the yield from one developing country to another.

iv) Furthermore, Springwell's track record and the evidence of AP's day-to-day conversations with JA demonstrated conclusively that he was well aware of the concentration in Russia, and of the consequent lack of diversification, but that his preference was to retain that concentration.

v) Mr McCall (Springwell's expert) conducted a highly academic exercise in subjecting the portfolio to sophisticated portfolio management analysis. But this was a technical exercise, not related to the actual facts of the historic trading relationship, and was not one which JA could have been expected to have undertaken. In any event, as explained in Chase's submissions, it had significant flaws.

629. So far as Russia generally was concerned, the evidence cleared showed that it was an extremely attractive market to sophisticated investors in 1996 and 1997. In 1998, there were periods of volatility, but this did not render Russia an unsuitable country for investment by Springwell either generally, or at the levels at which it invested. On the contrary, AP remained attracted by the high yields on offer and, indeed, as demonstrated in particular by Springwell's investments in Prins, Russian volatility was seen by AP as an opportunity for gain. In my judgment that was within Springwell's long-held investment objectives. Further, of the two material Russian risks, I find that:

i) AP was at all times well aware of the risk of sovereign default and he frequently discussed this with JA. The risk of sovereign default on the local currency GKOs was universally seen as low. The risk of sovereign default on Prins was higher, at least as prices plummeted in mid-1998, but that was a risk which AP knowingly and willingly assumed.

ii) AP was also aware of the risk of devaluation of the Russian rouble. That risk was perceived as a very low risk in 1997. At times in 1998 it was a more real risk but there was no preponderance of view and it was reasonable to take the view that it would not in fact occur. That was the view held by JA, and AP was able to and did make his own assessment as to the likelihood of its occurrence.

630. As for the individual instruments or types of instrument, in my judgment they fell within Springwell's investment objectives, as I have held them to be. Nothing changed during 1997 or 1998 to alter JA's view that this was the case. Further, the material risks were all disclosed to Springwell and known to AP. Dealing with each in turn:

i) GKO-Linked Notes:

AP was an enthusiastic purchaser of GKO-Linked Notes, which produced high yields on short-term assets and which provided Springwell with the benefit of cash flow and liquidity. They were a standard product available in the market, which were purchased in large quantities by many other emerging markets investors. As the underlying GKOs were sovereign local currency debt, the risk of default was small, and they also had the benefit of good quality local currency hedges. They easily fitted within Springwell's portfolio. There was a vast amount of evidence, expert and otherwise, relating to the alleged unsuitability of the GKO-Linked Notes for Springwell's portfolio, the risks attached to the Notes, whether AP was warned about these, and whether Chase, through its own proprietary trading book ("the prop book"), became aware of the increasing likelihood of default on the underlying GKOs. Having reviewed this evidence, I reject Springwell's contention that the evidence relating to the prop book trading and the other evidence established that Springwell should never have been advised to invest in GKO-Linked Notes, alternatively should not have been advised to invest in the Notes to anything like the extent it was; alternatively should certainly have been advised in July and/or early August 1998 (at the latest) to reduce as much as it could, and eliminate, if possible, its exposure to the GKO market.

ii) Prins and IANs:

In 1998, AP decided to embark on a trading strategy with a portion of the portfolio, whereas until then he had largely bought assets to hold until maturity. Prins and IANs (particularly Prins) were the most liquid instrument in the Russian market, they were sovereign risk, they provided the volatility AP desired for the purpose of generating profits and were entirely suitable to that strategy.

iii) Other Russian investments:

Springwell bought a variety of other Russian Eurobonds and corporate issues. Whilst a very small proportion of the portfolio did represent higher risk assets, these were all good quality emerging markets investments producing a high yield, and which were either sovereign or good quality corporate risk. They were fully consistent with Springwell's objectives.

iv) Indonesian Bonds

Springwell bought some high quality Indonesian bonds in late 1997, seeking to take advantage of the instability in the country at that time. This was wholly consistent with AP's investment objectives. Subsequent events showed that he was keen to repeat his purchases as the level of instability increased. In this context I do not accept Mr McCall's criticisms either: (a) that the concentration of Indonesian paper at 5.5 % by market value as against a zero rating in the EMBI Global index was "unduly large";^[191] or (b) that the Indonesian bonds were "weak corporates", which did not constitute "good quality Emerging Markets Investments" on the basis of their EBITDA^[192] to interest expense ratio.^[193] But the EMBI Global was not a particularly relevant index, and the Chase research team, which (along with other market information) was strongly in favour of these bonds at the time, had specifically looked into their EBITDA to interest expense ratio, as well as other factors, and had nonetheless concluded that the Indonesian bond issuers were good quality credits in the context of emerging markets investments.

631. As I have already described in the narrative section of this judgment, SG, JA and others on various occasions pointed out to AP that some diversification of the Springwell portfolio out of emerging markets would be sensible and desirable. As part of the way in which Springwell's case developed during the course of the trial, Mr Brindle submitted that, irrespective of the role played by JA, Chase had an obligation to advise Springwell not merely to diversify out of its strong concentration in Russian assets, but also out of emerging markets generally. He submitted that the over-concentration of the portfolio in Russian investments began in mid-1997, and that it was in October 1997 that the investment case for Russia fell to be advised in the light of the Asian crisis and, in particular, the collapse of the Hong Kong stock market on 23 October 1997.
632. I have given careful consideration as to whether, in all the circumstances (and on the assumption, contrary to my primary conclusion, that a duty of care in this respect was owed), what the Private Bank, did was sufficient. With a slight degree of hesitation, I have concluded that what it did was sufficient, given Springwell's trading history, its investment objectives as I have held them to be, the fact that the Polemis' unencumbered shipping fleet was a factor in overall diversification, and AP's personality and enthusiasm for trading in emerging markets, including his often expressed reluctance to invest in investment grade assets or IMA type products and his reaction to JA's suggestions that he should do so.
633. Accordingly, I find against Springwell on the issue of breach. If, contrary to my conclusion, there was, on the foregoing hypothesis, any breach on Chase's part, I would limit such breach to a failure on the part of the Private Bank to advise Springwell more specifically as to the dangers of having the entirety of its portfolio invested in an emerging markets investments; and, in particular, a failure to advise it during the period from March 1996 to August 1998 to diversify out of emerging markets into a wider range of assets..

Section IV: General Advisory Claim – Issue 1.3: Causation

634. The issues on causation are set out in paragraphs 13 and 14 of the List of Issues as follows:

i) Did Springwell rely and/or reasonably rely on advice from Chase in making its decision to purchase and/or continue to hold any, and if so which, investments?

ii) If Chase owed any contractual or tortious duties as set out above, and if Chase acted in breach of any such duty, did that make any difference to the portfolio Springwell had? If so, what portfolio would Springwell have had absent Chase's breach(es)?

635. Again, in the light of my conclusions in relation to prior issues, these issues do not strictly arise for determination. However, given that this case may well go further, I should perhaps briefly state my conclusions on the issues as to whether Springwell can establish that the alleged breaches of duty on Chase's part actually caused Springwell's losses.
636. The articulation of the issues reflects the two ways in which causation was argued; causation in fact and hypothetical causation, although, in reality, in relation to Chase's alleged failure to advise, the two arguments merge. As Mr Hapgood pointed out, causation is a fact-sensitive enquiry. Thus, in order to recover in respect of any particular loss, Springwell has to establish, on the evidence, that the relevant breaches of duty on the part of Chase, did in fact cause that loss.
637. Springwell's approach to the issue of actual causation was not to establish that any particular decision (whether buy, sell or hold) relevant to the make-up of the portfolio was made in reliance upon any particular alleged breach of duty. Rather, its approach was to say: because Chase was Springwell's investment adviser, because Chase acted in breach of duty in failing to give appropriate investment advice, because AP "relied" in a general sense on JA, and because the Russian default massively reduced the value of Springwell's portfolio and threw it into negative equity, therefore it follows Springwell's losses were caused by Chase's breach.
638. The essence of the first way in which Springwell put its case was, in effect, that AP simply "rubber stamped" everything that JA recommended; that every single operative decision that was made by AP was made in reliance upon some breach or other on the part of Chase. Thus, in effect, what Springwell contended was that the portfolio should be treated, for these purposes, as something akin to a discretionary portfolio, with the result that it was not necessary to examine the operative decisions made on any individual transaction. Accordingly, Springwell simply claimed damages for every Russian or Indonesian asset which it held at 17 August 1998, regardless of whether, for example, the decision to purchase was made without any recommendation from JA, contrary to the views of JA, from a salesman other than JA, or for reasons which are nothing to do with anything said or not said by JA.
639. However, as I have already described, the evidence in fact showed, that far from simply rubber-stamping JA's recommendations, or, as AP described it in one of the more unconvincing passages of his evidence, from their relationship being akin to the trust that a dog had in his master, it was AP who made the actual decisions. Of course, as I have explained, AP relied on JA for information, prices and other such materials. He also frequently sought the views of JA in relation to individual investments. He clearly valued those views highly. But AP knew and determined for himself the direction of the portfolio. He knew how much money he had and how much he wanted to invest. He knew and determined for himself that he wished to invest in emerging markets. He decided what yields he wanted, what countries he was interested in and what types of investments he wished to buy and in what amounts, in order to achieve Springwell's objectives. He would choose, on occasions between the various different bonds which JA would offer him.
640. Thus the tapes of the phone conversations do not paint the picture of a man who could possibly be described as a rubber stamp. Often they show that AP would seek prices from JA and then decide what to do. On other occasions they show that the actual decision was made entirely separately from JA, or without any input from him. Sometimes AP would play devil's advocate in the discussion in order critically to evaluate JA's views. There are many examples in the transcripts where AP either ignored what JA said or did the opposite of what he said. They showed that AP was fully capable of, and did, make his own independent decisions.
641. Accordingly, on the level of actual causation, in relation to this first way in which Springwell put its case, I conclude that Springwell has failed to show that the particular investments comprised in its portfolio at the date of default were held as a result of a breaches of duty on the part of the Investment Bank, or the Private Bank, acting by JA, in advising Springwell to buy or to continue to hold a particular investment, or in failing to advise it to sell a particular investment, rather than on the basis of AP's own decision.
642. The second, and more sophisticated, way in which Springwell put its case on causation, particularly as developed through final submissions as explained above, was that because the Private Bank (principally, although the allegation was maintained in relation to the Investment Bank, by reason of Springwell's continued use of the term "Chase") failed to discharge its obligations to give appropriate investment advice to Springwell:

i) the investments which Springwell held at the date of default ("the Claim Portfolio") was inconsistent with Springwell's investment objectives (as described by Springwell); thus, if Chase had not acted in breach, it would have advised Springwell:

"…only to purchase high quality (investment grade) bonds and commercial paper, so that the portfolio would have comprised time deposits and/or Western European and US government bonds, and corporate paper from blue-chip issuers."^[194];

the model portfolio that Springwell should have been advised to purchase by Chase, on the basis of its own case as to its investment objectives, was described as "Scenario A" or "Portfolio A"; alternatively

ii) if Chase had not acted in breach of its investment advisory duties, the model portfolio that Springwell should have been advised to purchase by Chase, on the basis of Chase's case as to Springwell's investment objectives, was "Scenario B" or "Portfolio B", which was a differently-spread emerging markets portfolio; alternatively

iii) if Chase had not acted in breach of its investment advisory duties, even on the basis that Springwell's investment objectives were as described by Chase, Springwell would have been advised to diversify a substantial percentage of its portfolio out of the emerging markets class of investment, and thus, at the date of default would have held a substantial percentage of its portfolio in other asset classes.

643. I necessarily reject the causation arguments under sub-paragraph (i) above, since I have rejected Springwell's case as to its investment objectives. I would also reject these arguments in any event, as there is no evidence to suggest that AP would have been prepared to acquire and maintain a fundamentally different sort of portfolio of the alleged conservative type.
644. I also reject the causation arguments under sub-paragraphs (ii) and (iii) above. My principal reasons may be summarised as follows:

i) I reject the contention that, if Chase had not acted in breach of its investment advisory duties, and had properly advised Springwell to diversify out of Russia, the model portfolio that Springwell should have been advised to purchase, on the basis of Chase's case as to Springwell's investment objectives, was "Portfolio B", namely a differently-spread emerging markets portfolio. Having reviewed the evidence between Springwell's expert, Mr McCall, and Chase's expert, Ms Macleod-Wilson on the topic, I prefer the latter's analysis that, applying those objectives, there is no reason to suppose that Springwell would have acquired any other emerging markets portfolio apart from the one it did in fact acquire. As she said, that portfolio was consistent with Springwell's investment objectives and there was no reliable basis for substituting a different, and inapposite, benchmark return based on an inappropriate global index. That was because, as JA was able to discern Springwell's investment objectives, on a day by day basis, it was inapposite to try to gauge different returns by reference to the crude yardstick of a composite benchmark index. There was no identifiable general benchmark which reflected the returns sought by emerging markets investors such as Springwell. Moreover her evidence was also to the effect that the level of leverage maintained on the actual portfolio was also consistent with Springwell's investment objectives.

ii) Moreover, there was no evidence from AP to the effect that, if he had been warned that the Springwell portfolio was over-concentrated in Russia, he would have invested in any other particular emerging markets area, so the evidence relating to hypothetical Scenario B is somewhat incomplete.

iii) I do not accept AP's evidence to the effect that, if only GG, MF, SG or some other senior person at the Private Bank had sat him down and properly warned him about the dangers of the lack of diversification in Springwell's portfolio, it would have made a difference to his investment strategy, either to diversify out of Russia into other emerging markets assets, or out of emerging markets altogether into other asset classes. Thus if SG had strongly advised AP, whether in 1996, 1997 or 1998, to diversify 40% or 20% of the portfolio out of emerging markets into other asset classes, I conclude that AP would not have done so. On the evidence, I do not believe that he would have reduced the concentration of Springwell's portfolio in emerging markets assets to any significant extent whatsoever.

iv) Moreover, had JA taken the step of telling AP that, in his opinion, the assets which AP was seeking, and the assets which he was regularly buying, did not in fact meet his investment objectives, JA's comments would have been met with derision. AP, who was in charge of his own portfolio, would have made it clear that it was for him to determine what his own investment objectives were and for him to determine what assets he did and didn't want to buy. Any diversification suggestions that JA in fact made, fell on stony ground.

v) AP was very strongly resistant to any change to the sort of activities in which he at all times had engaged with JA, under which he (AP) was in absolute control of the portfolio, running it for the returns which he earned and for the opportunities which he sought out. Thus, AP's reaction to the attempts made, in particular by the Private Bank, to encourage diversification suggest that he would have been wholly resistant to any such advice. Indeed, SPAP's evidence was that, even in the early 1990s, AP was being pushed to diversify into other asset classes, but was reluctant to do so. The evidence showed that for AP, really everything - except emerging markets investments – generated insufficient yield. His perception of the inadequacies of the returns on the IMAs caused him to close those accounts and showed him to be extremely resistant to investing any more funds in managed accounts. On his own evidence, equities were out of the question. The idea that high quality corporate bonds or gilts would have generated a sufficient return to be of interest to AP I find to be fanciful. Over the period Springwell had earned a sum in the region of approximately $230 million in coupons and capital gains on its emerging markets portfolio; I do not consider that AP, even if advised to do so, or of the dangers of concentration in emerging markets assets, would have made a significant diversification into other asset classes.

vi) Likewise, AP's reaction to the frequent discussions he had with JA about the heavy concentration in Russia and the benefits of diversification are pointers against the establishment of these causation arguments. AP knew that diversification was a good thing in principle, and knew that Chase internal credit had a concern about the heavy weighting in Russia. This made absolutely no difference to him, as he continued to invest in Russian assets, and in particular in Prins, all the way to the default.

vii) The evidence did not show AP to be a man who responded to the prudent advice of others; rather, it showed him to be a man who determined for himself what he wanted to do. Thus, for example, he accepted in evidence that he would not have been interested in any managed funds. Likewise, in relation to his emerging markets portfolio, he said that he wanted to narrow rather than widen his interests. AP well knew, for example, the difference between investment grade and non-investment grade, not least because he had an investment grade facility. He also regularly signalled his objection to investment grade assets, because they were as, he said, "so expensive" and to other better quality assets which gave him, as he said, "shitty returns". Also instructive in this context were ML's attempts to sell AP higher-quality assets over par. Not only did he not wish for them, he was incensed that they could have thought that he might be interested in such a "stupidity".

viii) Nor do I consider that, if AP had been given any further risk warnings, such warnings would have resulted in any significant change to Springwell's strategy. Risks in Russia and Indonesia were frequently discussed between JA and AP, and AP received written risks disclosures in relation to, for example, the GKO-Linked Notes. None of these matters made the slightest difference to him, because he well knew that the risk was the price he paid for the returns he sought. There is absolutely no reason to believe that, had JA said even more than he did, this would have caused AP to make any changes to his investment profile.

ix) The evidence from Ms Mcleod-Wilson was to the effect that the investment approach of AP was a common one within the emerging markets world. As she said,^[195] investors with more aggressive yield targets tended to cluster in certain countries at certain times, for example in Brazil and Russia in 1997, whereas investors with more conservative views would cluster in different countries, for example Mexico in 1998. AP was thus making decisions which were in line with other investors with similar views.

x) AP was a most reluctant seller of anything and was particularly averse to selling at a loss. Further, in cross-examination, he accepted that, if radical advice had been given to him in 1998 to sell down the portfolio, he would not have done so:

"Q. I probably phrased the question badly. I was not suggesting that that was a change. What I was suggesting was that if Chase had suggested a major change, sell 75 per cent of the emerging market portfolio, you would have said "Why upset something that is working?"

A. But I think we touched on this subject before --

Q. Do you agree with that?

A. No. We touched on this subject before and I do remember that I did reply that 1998 -- if suddenly out of the blue in March 1998 they said that, I would probably say "no", but this is not the appropriate time. It is done five, six, ten or eight years earlier, and while something is growing, then sort of -- it is like the tree; it grows and it branches, you know. He was saying about at the end of the day to go to reverse a -- that is a very drastic thing to do. So I did not think that anybody was -- it is like me deciding out of the blue, you know, get out of shipping because some other business is more ludicrous (sic). I would not do it because that is all I know. It is too drastic."^[196]

I do not accept either that, had JA, SG or MF had come to AP at some any earlier point, before 1998, and advised him to sell down his portfolio, or any part of it, whether out of Russia, or out of emerging market investments altogether, AP would have acceded to such a suggestion. There is no evidence to support such a case. Ultimately, as he often said on the transcripts, AP was a buyer, not a seller, and he had a very strong aversion to holding cash. Indeed, his innate reaction to market volatility was to increase his exposure not to reduce it. That is what he did in Mexico. That is what he did in Indonesia. And that is what he did in Russia in 1998. There is no prospect in my judgment that, had JA, MF or SG (or even GG) said something different at some earlier stage, AP would have decided to sell down his portfolio in the manner alleged.

645. I should mention that, in the context of the argument on causation, I raised the question whether, irrespective of the views of AP, Chase had a duty to advise Springwell, the corporate entity, that AP's reluctance to diversify were contrary to Springwell's interests and that it should consider diversification. I am satisfied that it would have made no difference even if, for example, Chase had written a formal letter to such effect or spoken to SP. There was no evidence from Springwell to the effect that the adoption of such a course would have resulted in any change of direction. SP had delegated to AP all investment decisions in relation to Springwell; there was nothing to suggest that he would have wished to persuade or influence AP to act differently, even in the light of such a letter. Moreover, although SP was described by AP as only having an administrative role in relation to Springwell, it was clear that at all times SP himself was well aware of the composition of the portfolio and the manner in which it was invested. Thus it was SP who received the trade confirms, logged their details and recorded and calculated the yields on each individual investment. Moreover, even after the Russian default, when SP took over the running of Springwell and the Polemises' other investment vehicles, the evidence showed him to be keen on a non-diversified emerging markets portfolio.
646. Accordingly, in my judgment, Springwell has failed to establish its case on causation, even in the event that it were to succeed in establishing that Chase were in breach.

Section V: General Advisory Claim – Issue 1.4: Quantum

647. In the circumstances, the issues as to quantum as set out in paragraphs 15-19 of the List of Issues are entirely academic. It did not seem to me to be a sensible or proportionate use of time to express my conclusions at this stage on the various quantum issues (which would necessarily have to be stated on the basis of various different hypotheses as to duty, breach, and causation). This view was based on the fact that the quantum issues:

i) are highly dependent upon the precise nature of any breach or breaches of duty established, and upon the precise causative link between the relevant breach and loss;

ii) raise complex issues of law as to, for example, the relevant dates for the assessment of loss, and the extent to which Springwell would have to give credit for gains received in respect of other investments not comprised within the Claim Portfolio, and returns received after the date of assessment in respect of assets within the Claim Portfolio; and

iii) involve the determination of numerous issues of fact and law in relation to the Shipping claim, (even if Mr Brindle's suggestion were adopted that questions relating to the actual calculation of the Shipping Claim should be left to agreement between the parties).

648. In the event of a successful appeal against my judgment on liability, and the consequent identification by the Court of Appeal of the breach or breaches of duty found by it to have been established, and of the relevant causative link between breach and loss, I can readily state my conclusions on the remaining quantum issues on the basis of the existing evidence.

Section VI: General Advisory Claim – Issue 1.5: Contributory Negligence

649. Likewise, on the basis of my previous conclusions, this issue does not arise for determination. Moreover, in the light of my previous findings, in particular as to duty and causation, it is somewhat artificial to express my conclusions on this issue at all. However, I do so, on the hypothetical basis of Springwell's own case, and notwithstanding that I have found against Springwell on many of its factual allegations.
650. In relation to the claim under Scenario A, based on Springwell's own investment objectives, Mr Brindle realistically recognised that, even if Springwell were to succeed on the investment advisory claim, there would be a reduction in the damages awarded in respect of Springwell's contributory negligence. Thus it was accepted that, on this basis, AP had to take some of the responsibility for the fact that he did not hold such a portfolio, even though what he did obtain was based on JA's advice and recommendations; that it could be said that AP ought to have appreciated that Springwell's investment objectives were not fully achieved by the investments in its portfolio, and that an element of responsibility attached to AP, albeit much less than attached to the Private Bank and to JA.
651. In relation to the claim under Scenario B, and the case relating to the GKO-linked Notes, based on Chase's case as to Springwell's investment objectives, Mr Brindle submitted that contributory negligence did not come into play. The basis for this submission was that it was said to be hard to blame AP, in the light of JA's advice and his strong steer in favour of Russia, and GKO-linked Notes in particular, for the weighting of the portfolio so heavily in favour of Russia and the particular high-risk Russian and Indonesian investments held, rather than a properly balanced emerging markets portfolio, for example as would have been reflected in the EMBI Global type portfolio suggested by Mr McCall. Thus Mr Brindle submitted that the mix of emerging markets and the particular investment products within any country risk were matters where AP was entitled to, and did, look to JA; that this was reinforced by the fact that JA knew AP was looking to him on these issues and proceeded to act in a way which he knew that AP would rely upon, as his trusted financial adviser.
652. In my judgment, whatever the basis of (on this hypothesis) Springwell's successful claim for damages, a substantial reduction would have to be made to reflect Springwell's contributory negligence. The matters amounting to contributory negligence would include the following factors, identified by Chase in its closing submissions, which show (often on the basis of Springwell's own case) a clear disregard for Springwell's own interests in the pursuit of profit:

i) expecting a full advisory service throughout but never bothering:

a) to request such an advisory service or to agree or confirm the terms of the supposed advisory service;

b) to explain to JA or to anyone else at Chase, in clear terms, Springwell's investment objectives;

c) to consider, or raise with JA or with anyone else at Chase, even the possibility that the investments being purchased were not consistent with Springwell's actual investment objectives;

d) to question whether JA, as an emerging markets specialist, could provide such an advisory service;

ii) treating contractual documents with contempt, whether they included terms of business or terms and risks relating to individual investments;

iii) not bothering to read Chase research or, apparently, the research of any other bank;

iv) ignoring any views that AP did not want to hear, such as the views of other salesmen at the Investment Bank who were more pessimistic than JA;

v) aggressively pursuing a strategy of high returns and opportunistic investments, thereby assuming obvious risk;

vi) aggressively pursuing a strategy of full investment, including by way of large amounts of leverage, thereby increasing the risk;

vii) acting, as alleged by Springwell, as a "rubber stamp", namely by exercising no critical faculties in the decision making and allowing the portfolio to be run as if it were a discretionary portfolio, but without a discretionary mandate;

viii) taking no steps to understand either the nature of the instruments which Springwell was buying or the level of risks attached to those instruments;

ix) ignoring frequent recommendations to diversify, and concerns about the concentration, both outside the emerging markets and within the emerging markets, indeed actively avoiding attempts by Chase to present diversification alternatives;

653. As Mr Hapgood submitted, all of these allegations were in effect part of Springwell's own case. Thus it was a necessary corollary of Springwell's factual case that, during the 10 years or so in which they purchased very large quantities of investments from Chase, the Polemises were guilty of a flagrant disregard for their own interests. It was Chase's case, of course (and I have found it to be so), that the Polemises knew very well what they were purchasing and that their portfolio was fully consistent with their true investment objectives. However, if it were indeed the case that the Polemises accumulated, over several years, a substantial portfolio of hundreds of millions of dollars of emerging markets paper without bothering to understand that the very high returns which they enjoyed were matched by corresponding risks, and without, on their own case, exercising any critical functions in connection with the acquisition of that portfolio, then I agree with Mr Hapgood that there is scope for a significant reduction for contributory negligence, if that stage in the analysis is ever reached. In particular, if, contrary to my findings, it were indeed the case that AP allowed himself to act as a rubber stamp, and to exercise no critical faculties in relation to Springwell's portfolio, then he was grossly negligent, no matter what the disparity between the actual portfolio and his objectives.
654. Any assessment of the percentage reduction is necessarily a somewhat rough and ready calculation. In my judgment, if Springwell had succeeded on the way in which it put its claim under Scenario A, I would have regarded 70% as an appropriate deduction, as its culpability on that hypothesis was greater. If Springwell had succeeded on the way in which it put its claim under Scenario B, I would have regarded 60% as an appropriate deduction. Likewise, if Springwell had succeeded on its claim that Chase should have advised Springwell to diversify a percentage of its portfolio out of emerging markets, in the period 1996 – 1998, I would also have considered 60% as an appropriate deduction. On any basis the largest share of responsibility for any losses suffered must fall on Springwell itself.

Section VII: Misrepresentation – Issues 2.1 – 2.2

Introduction

655. I turn now to deal with Springwell's misrepresentation claims, both under the 1967 Act and at common law, the issues in relation to which are identified at Issue 2 paragraph 23-39 of the Agreed List of Issues. The claims theoretically open up a vast evidential inquiry involving a close analysis of approximately 149 statements made in the course of numerous telephone conversations between JA and AP over a period from about 27 May 1997 to 29 June 1998. This analysis involves a determination, inter alia, of the questions:

i) whether the representations were actionable representations;

ii) what representations were actually made by JA;

iii) whether they were false;

iv) whether they were in fact relied upon; and

v) whether they were negligently made (in the case of the common law claims) or (in the case of the 1967 Act claims) whether the maker of the maker of the statement had reasonable grounds to believe, and did believe, that the representations were true.

656. The 149 statements which Springwell impugned as constituting misrepresentations were collated under various different headings at Appendix A to its closing submissions. This appendix quoted selected extracts from the transcripts of the telephone conversations between JA and AP in the period May 1997 to August 1998.
657. The precise case was difficult to grasp from Springwell's voluminous pleadings. In his oral closing, Mr. Brindle categorised the misrepresentations under three heads. The first was the general misrepresentation that the investment opportunities being presented by JA were suitable for Springwell. This was articulated in the RADC^[197], as follows:

"In the course of advising and recommending to AP that Springwell should invest in (and, subsequently, continue to hold) [the various investments] JA ... expressly alternatively impliedly represented to AP, alternatively expressly or impliedly represented to AP that there were reasonable grounds to believe: (a) that the investments he was proposing were appropriate for Springwell both in themselves and as part of Springwell's portfolio as a whole; (b) that the investments which he was proposing could reasonably be expected to result in a profit [this allegation was not proceeded with at trial]; and (c) that the investments which he was proposing were not subject to any significant risks of default or failure which had not been discussed or considered with AP."

Springwell's pleaded case is that these representations were made "impliedly by reason of [JA's] recommendation of the investments in the context of the advisory relationship". These are the issues reflected in paragraphs 23(1) and (3) of the Agreed List of Issues.

658. The second category of misrepresentations comprised general misrepresentations about Russia and the state of the Russian economy; for example that:

i) the economic position of Russia was good, alternatively was not a cause for concern;

ii) the Western governments and international institutions could not allow the former Soviet economies to fail and so they could be assured of support in any difficulties they might experience;

iii) there would be no default on Russia's debt obligations and/or no devaluation of its currency;

iv) falls in the prices and/or increases in the yields of Russian debt investments during 1998 were not a reflection of a weak economic position in Russia.

These are reflected in sub-paragraphs 23(4) to (7) of the Agreed List of Issues.

659. The third category of alleged misrepresentations comprised the specific misrepresentations allegedly made by JA in relation to the GKO-Linked Notes, the Ukraine Notes and Russian Banks. These are reflected in sub-paragraphs 23(9) to (13) and (15) to (19) of the Agreed List of Issues.
660. In response to Mr. Hapgood's criticism that Springwell had not, whether in its pleadings or in its evidence, made any link between the making of any particular misrepresentations and the making of any particular investment in reliance upon the particular misrepresentations, Mr. Brindle, in closing, produced two schedules which respectively identified: (i) the transcripts of telephone conversations which related specifically to Russian assets in the Claim Portfolio other than the Failed Notes, the Prins and the IANs; and (ii) the transcripts which related specifically to the Failed Notes.

The general misrepresentation claim

661. In effect, the general misrepresentation claim was indistinguishable from the general advisory claim, as the former claim was likewise predicated upon a duty of care imposed on CIBL/CMIL to advise as to the suitability of Springwell's investments. Mr. Brindle, however, submitted that, even if I were to find that Chase did not assume a general advisory duty towards Springwell, "it [was] clear nonetheless that JA did hold himself out to Springwell as only selecting and recommending investments which were appropriate". Thus, he submitted, in those circumstances, and even absent a general duty of care, the necessary implication of JA's recommending an investment at all was that the investment was appropriate for Springwell. I do not agree. Any such duty, even if more limited that the wider investment advisory duty alleged by Springwell as its primary case, fails for the reasons which I have already set out above in relation to the general advisory claim.
662. Mr. Brindle realistically recognised that this general claim was not one which could easily be made under the 1967 Act, since it did not involve a statement of fact that induced a contract, but was rather one that was made at common law on the basis of negligent misrepresentation.

The specific misrepresentation claims

663. Mr. Brindle also accepted that the second category of misrepresentation claims (namely specific misrepresentations about Russia and the Russian economy) were effectively made at common law, rather than under the 1967 Act, since Springwell's case under this head was not merely that JA's repeated statements as to his views as to the Russian economy induced AP to buy Russian investments, but also that such statements induced Springwell to continue to hold them. He contended that that was sufficient reliance for the purposes of the common law claim in negligent misrepresentation.
664. In relation to the third category of misrepresentation claims (namely specific misrepresentations about the GKO-Linked Notes and other securities), Mr. Brindle submitted that these claims fell squarely within the scope of the 1967 Act because they involved statements of fact made to induce purchases. Insofar as the investments were retained in reliance on the misrepresentations, the submitted that the claim was made at common law.

The Relevant Provisions

665. In my judgment, the short answer to the specific misrepresentation claims, whether they are made under common law or pursuant to the 1967 Act, is that they are precluded by the Relevant Provisions in the DDCS letters, the MFA (insofar as relevant), the GMRA and, in relation to claims made in respect of the GKO-Linked Notes, those in the GKO-Linked Notes documentation. Before returning to the Relevant Provisions to explain why, in my judgment, they operate to bar Springwell's claims in misrepresentation, it is pertinent to identify precisely what Springwell would have to establish to show that the statements made were actionable misrepresentations (whether under the 1967 Act or at common law). As stated in Chitty^[198],

"Statements of opinion and intention. The traditional rule is that a misrepresentation must be a false statement of fact, past or present, as distinct from a statement of opinion, or of intention, or of law. A mere statement of opinion, which proves to have been unfounded, will not be treated as a misrepresentation, nor will a simple statement of intention which is not put into effect; for as a general rule these cannot be regarded as representations of fact, except in so far as they show that the opinion or intention is held by the person expressing it."

666. However, a statement of opinion or intention may carry with it an implied statement of fact. For example, it may in certain circumstances carry with it

i) the implied statement of fact that the person who expressed the opinion believed it to be true; or

ii) the implied statement of fact that the person who expressed the opinion had reasonable grounds for holding it.^[199]

667. The courts appear to be more willing to imply into a statement of opinion, a statement of fact to the effect that it was made honestly or in good faith, than to a statement to the effect that it was made with reasonable grounds.^[200] The burden on the claimant is therefore a more demanding one if he asserts, as does Springwell in the present case, that any opinion expressed by JA carried with it each time an implied statement of fact that it was made with reasonable grounds, rather than just that it was honestly held. As stated in Chitty (op cit) (paragraph 6-010), the conventional distinction between statements of fact and statements of opinion does not, by itself, satisfactorily demarcate the line that separates a statement that is actionable from one that is not. The court has to investigate the facts and to consider the circumstances and the context in which the statements were made:

"The fundamental principle which underlies the cases is not so much that statements as to the future, or statements of opinion, cannot be representations; but rather that statements are not to be treated as representations where, having regard to all the circumstances, it is unreasonable of the representee to rely on the representor's statements rather than on his own judgment".^[201]

Moreover, as Rix J (as he then was) stated in Avon Insurance Plc v Swire Fraser Limited^[202], because damages under section 2(1) of the 1967 Act are assessed on the fraud measure by reason of the decision in Royscot Trust Limited v Rogerson^[203]:

"… it ought in my view to follow that where there is room for an exercise of judgment, a misrepresentation should not be too easily found."

668. Of course, some of the statements made by JA which are impugned as misrepresentations were indeed statements of fact; many others were necessarily statements of opinion. Springwell alleged that these were coupled with an alleged implied representation of fact that JA had reasonable grounds for belief that his statement of opinion or views were true. Thus, in deciding whether the Relevant Provisions bar any claims for misrepresentation, it is relevant to ask whether their terms are apt to cover expressions of opinion as well as statements of fact. It is also relevant to consider whether the Relevant Provisions demonstrate that, in the context in which they representations were being made, it was reasonable for the representee to rely on the statements that were being made rather than upon his own judgment. In other words, were they actionable at all?
669. In my judgment, as in IFE v Goldman Sachs^[204], the question of what actionable representations, if any, were made by JA, has to be considered by reference to the Relevant Provisions in the DDCS Letters, the MFA (insofar as relevant), the GMRA and the GKO-Linked Notes documentation. I have already ruled against Springwell's submissions that the DDCS Letters did not apply to Springwell's dealings at all, or, alternatively, did not apply to Springwell's dealings in the GKO-Linked Notes, the VW RUR Note, or in the Ukraine Note (on the grounds that they allegedly did not fall within the definition of "investments"). Nor do I accept the further point made by Springwell in this context that paragraph 4 of the DDCS Letters cannot affect claims in respect of representations given after the purchase of a particular investment and relied upon in Springwell's decision to continue to hold that investment. In my view, the words in context are apt to cover advice given as part of any service contemplated by the letter – which included access to the views of salesmen in emerging markets trading, such as JA. Likewise, I have already rejected Springwell's submission that paragraph 6 of the DDCS Letters does not cover any advice actually given.
670. My analysis of the Relevant Provisions in the DDCS Letters is that they precluded any representation being made at all, whether of fact or of opinion, by CMB, CIBL or CMIL. The terms of the Relevant Provisions in the Letters make it absolutely clear:

i) that neither CMB nor CIBL/CMIL (or any associated company) were taking any responsibility for the "fairness, accuracy or completeness" of any information, written or oral regarding "any instrument or investment opportunity";

ii) that neither CMB nor CIBL/CMIL would not have "taken any independent steps to verify" that information written or oral;

iii) that "no representation or warranty express or implied" was made by CMB, CIBL/CMIL or their officers (in this context, JA) in relation to such information written or oral; and

iv) conversely, that by signing the letters, Springwell "By placing an order" with CMB, CIBL/CMIL, expressly represented that it was a "sophisticated investor" and that it had "independently, without reliance on CMB, CIBL/CMIL or any associated person, made a decision to acquire the instrument having examined such information relating to the instrument and the issuer thereof as you deem relevant and appropriate." (My emphasis)

671. As I have already set out, the relevant terms of the MFA (so far as relevant to the earlier transactions in respect of which misrepresentation claims are made) and the GMRA contained similar representations and warranties by Springwell, albeit in the case of the GMRA, given to CMB. Thus, under clause 9 of the GMRA, Springwell represented that:

i) unless there was a written agreement to the contrary, it was not relying on any advice, whether written or oral, from CMB;

ii) it had made, and would make, its own decisions regarding the entering into of any transaction, based on its own judgment and upon advice from such professional advisors as it had deemed it necessary to consult;

iii) it understood the terms, conditions and risks of each transaction and was willing to assume those risks.

Further, by Clause 24 of the GMRA, Springwell represented that it was a sophisticated investor, that in the normal course of business it entered into transactions similar to the transactions in question under the GMRA, that it had access to such information concerning such transaction and the securities purchased as it had requested and that it was familiar with and able to evaluate the merits and risks associated with the transactions/securities.

672. By clause 25, it was contractually agreed that each transaction should be deemed to have been entered into by each party in reliance only upon its own judgment and that neither party should have any responsibility or liability whatsoever in respect of any advice given as to whether or not the other party should enter into any transaction, or in respect of views expressed by it or any of its officers, employees or agents, whether or not such advice was given or views were expressed at the request of the other party.
673. In addition, although, as described above, copies of the GKO-Linked Notes were sent to Springwell only some time after the settlement date, in my judgment, Springwell was bound in its dealings with CMSCI, CMB (and CMIL) by the terms of the Notes, which Springwell had repeatedly and on a routine basis, by the GKO-Linked Note confirms, represented that it had read, understood and accepted. Section 6(c) clearly stated that

"… in addition the Holder has not relied on, and acknowledges that neither CMSCI nor CMIL has made, any representation or warranty in respect to the purchase of this note."

Whilst that acknowledgement only expressly refers to the purchase of the relevant note, nonetheless, when taken together with the terms of the DDCS Letters, it is a strong pointer against it being reasonable for Springwell to rely on any statements made subsequent to purchase as being actionable representations inducing Springwell to retain the GKO-Linked Notes. Indeed, many of the statements relied upon were ones which were alleged to have induced both purchase and retention of the same instruments (albeit on different dates), or purchase and retention of different instruments (on the same date).

674. In those circumstances, it seems to me that the reasonable person, operating in the financial markets in which Springwell was engaged, on the terms of the Relevant Provisions in the DDCS Letters (and indeed, the other documents), would not have assumed that JA's statements were actionable, or that his expressions of opinion were to be treated as anything more than a trader's opinion from the trading floor, based upon Chase research and his own views of the markets, and of the economic and political situation. The reasonable person, in such circumstances, would not, in my judgment, have assumed that every comment made by JA in the course of the numerous telephone calls, conducted by him each day with his various clients, in the context of what was often a frenetic trading environment, was susceptible to minute scrutiny as constituting a potential misrepresentation.
675. Whether one approaches the issue at the first stage of determining whether an actionable representation was made at all, or, at the second stage, of determining whether Springwell is entitled to contend that it relied upon any representation that was made, it seems to me that the terms of the Relevant Provisions clearly establish that CIBL/CMIL, as dealers in the various instruments, CMSCI as issuers of the GKO-Linked Notes, and CMB as provider of the finance, were respectively only prepared to allow Springwell direct access to the emerging markets trading desk and to JA on the express basis that, in accordance with the signed contractual documentation, Springwell was contractually precluded from bringing a claim in misrepresentation, and that the Chase entities were not assuming any responsibility for statements that were made. Having contracted to trade with Chase on those terms, it is not, in my judgment, now open to Springwell to seek to elevate those trading discussions into pre-contractual representations or statements in relation to which it is contended that Chase assumed a duty of care.

Trading Opinion

676. Chase also sought to argue that, even in the absence of the Relevant Provisions, the type of comments made by JA were no more than "trading floor opinion" and therefore were not capable of being treated in law as representations of fact. I do not have to decide this point in isolation. It would, in theory, involve an analysis of each and every statement made, to determine whether, in context, it was reasonable to regard it as more than simple a statement of a market view. But I should perhaps say that the view which I formed, based on the evidence of both JA and AP, was that AP well appreciated that the context in which JA was offering his views and opinions was as a salesman. It was clear from his answers in cross-examination, and from the transcripts of the telephone calls that AP did not understand JA to be providing an in-depth expert analysis of the economic or political situation in Russia, or the considered views of an investment advisor. AP appreciated that JA was providing his own day-to-day views, based, in part, on the Chase in-house emerging markets research, and, in part, on his (JA's) own assessment of the market, gleaned from the financial press and the trading floor. The transcripts show that AP appreciated at the time that JA was exchanging views with him about often uncertain future events (such as, for example, possible devaluation of the rouble or the likelihood of Russia defaulting on its GKO obligations); and that, although JA's views were generally, although not invariably, positive and optimistic about the likely outturn of the Russian economy and the possibility of Russian default, there were more pessimistic views being expressed in the market at the time. Indeed, a colleague of JA's at Chase spoke to AP on 26 June 1998, and told him that in his view, there was a 30% chance of Russia defaulting on its financial obligations, but this did not deter AP from buying further Russian investments. AP himself challenged JA's views in their conversations, and clearly used JA and the Chase research views which JA was communicating as a sounding board. But the transcripts show that AP never abrogated his role as the decision maker in relation to which investments were to be made or rolled over.
677. Given the nature of the telephone conversations between JA and AP, in the volatile emerging markets environment, it appears to me to be highly likely that most of the statement made would not qualify as actionable misrepresentations in any event,^[205] even without the presence of the Relevant Provisions, but rather would be characterised on a proper analysis as nothing more than expressions of opinion without any representation as to the maker (JA) having objectively reasonable grounds for his views: see Bisset v Wilkinson^[206]. But, as I have said, I do not need to decide this point (and do not do so) since in my judgment, the Relevant Provisions are specifically designed to achieve (and did achieve) the result that Springwell is precluded from relying on any statement, whether as to advice or opinion, that may have been made by Chase.

Remaining issues in relation to the misrepresentation claims

678. In the circumstances, it is not necessary for me to determine the remaining issues in relation to the misrepresentation claim. These issues include:

i) what representations were actually made by JA;

ii) whether they were false;

iii) whether they were in fact relied upon; and

iv) whether they were negligently made (in the case of the common law claims) or (in the case of the 1967 Act claims) whether the maker of the maker of the statement had reasonable grounds to believe, and did believe, that the representations were true.

679. However, because the parties have devoted hundreds of pages of written analysis and argument to this claim, and there was extensive expert evidence as to market perception of the risks and rewards of investing in Russia in the period 1997 – 1998^[207], as a result of which I have necessarily spent considerable time reviewing the transcripts of the telephone conversations and the colossal raft of expert evidence, it is right that I should briefly state my conclusions on these issues. In summary, my conclusion is that there is no merit in Springwell's misrepresentation claims.

Alleged misrepresentations as to Russia and the state of the Russian economy

680. These are the representations referred to at sub-paragraphs 23(4) – (7) of the List of Issues. I heard extensive evidence from Mr Kraus and Mr Lopez-Claros in relation to the Russian economy, and as to market perceptions of Russia and during the relevant period. This evidence ranged far and wide over the macroeconomic landscape of Russia, and the views of erudite economists and market commentators. Much of the debate as to issues, for example, as to whether the rouble was overvalued or whether the servicing of the debt outstanding in the GKO market was such as to constitute a GKO pyramid, were highly complex and involved detailed consideration of statistical data and publications which were not available at the relevant time. Thus much of the debate between the experts was based upon hindsight views and analysis. Both of them were highly intelligent and had an impressive wealth of experience. Their evidence was extremely interesting and informative, but, at the end of the day, I remain doubtful as to much of its relevance. I also heard evidence, in response to certain of Mr Kraus' evidence in relation to market perception of Russia from Ms Mcleod-Wilson, another highly intelligent and impressive witness.
681. As a trader in a busy, and, at times, frenetic environment, JA could not realistically have been expected to have to given opinions based on detailed analysis of trends and data such as those of an analyst or economist. On many occasions, JA was simply a conduit for the views of the Chase economists who wrote the research pieces which were in evidence. On other occasions JA digested the information coming across his screen and formed his own opinions based on that information. It was not suggested by Springwell that Chase research materials were negligently inaccurate or unreasonable expressions of view at the time.
682. I do not consider that it is appropriate for me to construe and judge the statements that were made by JA on the basis that he was purporting to provide a full, in-depth analysis and review of the economic developments in Russia during the relevant period at issue, of the type provided by Mr Kraus and Mr Lopez-Claros in their evidence, both of whom clearly had vast knowledge and a far better grasp of the detailed economic drivers of the Russian economy than JA had.
683. The thrust of Springwell's case, based on Mr Kraus's original written reports, was to the effect that after October 1997, and certainly after January 1998, the general view in the market was that investing in Russia was a speculation on a single event, namely whether the International Monetary Fund ("IMF") or the G7 nations generally would bail Russia out. Thus Mr Kraus's evidence, in his early reports, was to the effect that, since the "bail out" was not certain, the market generally believed that there was therefore a substantial risk of a major economic disruption, including the risk of a large ("maxi") devaluation or a sovereign default "at all times after end-October 1997",^[208] and that, accordingly, the views expressed by JA about the risks of investing in Russia were outside the range of a reasonable emerging markets salesman at the time.
684. My conclusion on this topic, which is based not only on a review of the numerous press articles and research articles published at the time, but also on the evidence given by Mr Kraus himself in cross-examination, when he modified his earlier, more rigid, views to a considerable extent, and on the other expert evidence, is that the views expressed by JA, albeit very bullish at times, were not outside the range of what a reasonable emerging markets salesman might have expressed at relevant times during the period. The following headline points lead to this conclusion.
685. As explained by both Mr Lopez-Claros and Ms McLeod-Wilson, there was no uniformity of views at any stage in the lead up to the Russian default. Many market participants had different perceptions including the perception that Russian default would not happen. The unanticipated and unprecedented nature of the Russian default was evident from the reports of Ms McLeod-Wilson and Mr Lopez-Claros, as well as from the fact that Chase itself, and many other financial institution investors, had very substantial holdings of GKOs and other Russian investments at the date of the default.
686. Chase's case was that the risk that the rouble would devalue sharply against the dollar, termed in the market a "maxi" devaluation, was considered to be a low risk in 1996, and the same view prevailed until October 1997. Mr Kraus and Springwell did not dispute this. In November and December 1997, the effects of the Asian crisis were felt in Russia as investors lost confidence in emerging markets generally and there was capital outflow from Russia. As a result, during January 1998, there were rumours in the market of a devaluation, which AP and JA discussed, but the Central Bank of Russia ("CBR") raised its refinancing rates in order to show its determination to defend the rouble, and the rumours proved unfounded. February to the end of April 1998 saw the market recover and investor confidence return, and the CBR was praised in the market and by the IMF for its steadfast commitment to its policy of defending the rouble by raising interest rates. As 1998 progressed, during May to the IMF package in July, the risk of a devaluation of the rouble increased, although many, such as Ms McLeod-Wilson, the Chase research analysts, Lehman Brothers and Goldman Sachs considered that such a devaluation was unlikely.^[209]
687. The critical factor during the period from the end of May to 10 July 1998 was the question of the involvement of the IMF; in particular, whether it would provide assistance, and, if so, when and how large would its assistance be. Certainly many market views that were expressed at the time, (if not the majority) were to the effect that the IMF would support Russia, and that the package would be sufficient to allow Russia to muddle through
688. After the announcement of the IMF package on 13 July 1998, there was a period of approximately two weeks, until the last few days of July 1998, when the market was optimistic and fears of a maxi devaluation subsided.
689. However, by 27 July 1998, the Prins price had plummeted. But as AP himself commented in a telephone call with JA, in relation to the risks in the Russian market: "we're either talking about a 1929 situation… or the opportunity of a lifetime". That view appeared to have been shared by other commentators at the time.
690. The first two weeks of August 1998 were volatile and the market's fears of a rouble devaluation returned. However, even at that time, a devaluation was by no means considered "inevitable". It was only in the last few weeks before default, after the IMF package was perceived to have failed to restore confidence, that there was discussion in the market, as reflected in the Chase published research, about the possibility of default as one of a range of options which the Russian government might consider. However, AP and JA discussed this possibility in late July and early August 1998, and both took the view, which was reasonable, albeit, with the benefit of hindsight, wrong, that this would not happen. Chase research took the same view up to and including the Chase publication of Next Week on 7 August which stated:

"Russia can muddle through to the end of 1998. With a detailed examination of prospects for fiscal performance and external financing in the second half of this year, we conclude that Russia can maintain currency stability over the next five months." and that:

"Despite the current negative sentiment towards Russia, we believe the prospects are good and that the rouble will remain stable through the end of the year".

691. Mr Kraus' own articles, written in the period February to September 1998, contrast starkly with the highly pessimistic views that he put forward in his written reports as representing market view at the time. Likewise, by the end of his cross-examination, and contrary to his earlier expressed views, the gist of his evidence was that there was a range of views in the market, some more bullish about Russian risks and others more bearish. For example, he accepted that, contrary to his written reports, in January 1998, the view that international support from the IMF or G7 was essential to the survival of Russia was, at its highest, no more than an opinion confined to a minority of market participants, which did not even in fact justify comment in the financial press because it was not sufficiently significant.
692. Thus, for example, In his first report, Mr Kraus' views of the Russian position during the period February to April 1998 were summarised as follows:

"The severity of the Russian economic and financial problems was clearly apparent…the political situation was chronically unstable".^[210]

However, Mr Kraus was quoted in a Reuters article dated 24 February 1998 expressing views apparently directly contradictory to this statement:

"'During the run-up in the market, investors…ignored bad news and bought on good news', said Eric Kraus, head strategist at Regent European Securities. 'Now we're seeing the opposite situation – though there are problems, there has not been a fundamental change in the way the Russian economy functions. We're basically seeing a case of market hysteria' ".

693. Describing what he termed the "Chronology to Default" in his first report, Mr Kraus characterised the May to August 1998 period as the "final phase leading to the crisis and default". For him, the critical date was Kiriyenko's confirmation as Prime Minister, on 24 April 1998. He expressed the view that, after 24 April,

"it was absolutely clear that that the situation was deteriorating at an accelerating rate, and that the only thing which could save the Russian financial system was a major bail-out package from the West (i.e. the IMF)";

and that those "[i]nvestors, or rather speculators", who continued to invest in Russia, were "simply placing bets" on whether or not a package would be forthcoming. However, not only was this view not supported by the evidence relating to other market perceptions at the time, but it also was contradicted by the views that Mr Kraus, himself, expressed at the time, for example in an article for the Moscow Times which was published on 2 June 1998, in which he was positive in his praise for Russia's achievements. Other articles from this time carried remarks by Mr Kraus in similar, cautiously optimistic terms, rather than phrased in the unrelentingly pessimistic terms in his reports. Thus, for example, Mr Kraus was indirectly quoted as saying that he "expected" "major aid" in a Reuters article published the next day, 3 June 1998, and, on 5 June 1998, the Financial Times carried an article reporting Mr Kiriyenko's proposed budget cuts, which Mr Kraus reportedly described as "heroic".

694. In evidence, Mr Kraus conceded that, at the time, he had felt that there was a "a very strong reason for the international organisations to provide help". This clearly undermined Springwell's allegations that statements of opinion to similar effect made by JA were misrepresentations. Mr Kraus went on to add:

"A. That is a statement of my feelings, my hopes and my beliefs. I never knew that Russia would not fail. I hoped -- I mean this is to some extent a statement of hope. The IMF was being extremely precautionary, they were withholding tranches, they were making some very negative comments on the wires which were causing great concern in the market. I hoped that good sense and I hoped that perhaps the American political system would force a bail-out package, but I didn't know it to be the case. Yes, in my heart I believed that it would work out all right.

Q. Yes, and would you accept that it was the majority view in the market that the western governments would not allow Russia to fail and would provide a package if it was necessary?

A. Yes.

Q. Obviously you accept that was a reasonable view?

A. It was a reasonable hope. It was -- I held the view that they probably would provide a bail-out...".

695. Mr Kraus also admitted that, at the time, he had in fact argued against those who had said that Russia was "too big" to save (the argument that the moral hazard engendered by a bail out would be prohibitive). These concessions necessarily undermined the picture painted in his reports of an essentially inevitable process towards collapse, with no reflection of the optimism felt by him and others operating in the markets, that Russia's achievements would not be jeopardised by a failure of Western support. Mr Kraus was also quoted in several other papers at the time giving optimistic opinions about Russia.
696. The IMF package for Russia was announced on 13 July 1998. Mr Kraus' reaction, as reported in the press, again undermined the views expressed in his reports. Thus, in Newsday, on 13 July 1998, he was quoted as follows:

"A bailout package will give a substantial chance for a new wave of reforms…I do not share the pessimistic view that Russia will simply waste the money and fail three months down the line".

Likewise in the Financial Times, on 14 July 1998, there was a report that the markets had reacted with cautious optimism to the IMF package. It stated that the market's reaction would be critical to the success of the programme, and referred to the need for the Duma to pass various measures before the funds would be released. Mr Kraus' reported opinion was again optimistic:

"I think that the $20bn can basically provide the wherewithal to defuse the crisis on the GKO [treasury bill] market. It is now up to the Russian government to take advantage of this window of opportunity".

Once again, this undermines Springwell's case that JA's expression of his view that the package had bought Russia time until the end of the year, so that there would be no default or devaluation for the next 60 days, was a misrepresentation.

697. In Mr Kraus' first report, he was dismissive about the IMF package:

"The IMF rescue package was announced 14 July 1998. After an initial relief rally, the reaction of the markets promptly shifted to a very negative view…"^[211]

But in evidence the admitted that, when the package came out,

"…for at least the first part of that week, I was not only optimistic, I would say I was elated."

He went on to describe the existence of both optimistic and pessimistic views in the market as follows:

"The optimistic view was that it bought time – it didn't cure the problem, but it bought time, and that we believed, I think wrongly, with the vision -- with the advantage of hindsight, but at the time we believed that this would buy them breathing space and they could somehow restructure things so that they could gradually pay their way out of the debt pyramid that they had created".^[212]

"Q. You accept that right from October 1997 the optimistic view, to put it at its lowest, was that Russia would muddle through, if necessary with IMF assistance?

A. That is the optimistic view.

Q. You accept that formulation of it?

A. Yes. In any market there are always optimists and pessimists. There were optimists and the optimists would have felt, yes, that Russia would muddle through. There were people who believed that Russia was going to muddle through at all relevant times".^[213]

698. Further press articles reported Mr Kraus as continuing to state optimistic views well into August 1998. Thus, in a Wall Street Journal Europe article dated10 August 1998, which reported that Sberbank would "help dig the government out of a debt hole" by purchasing 62 billion roubles in treasury securities as part of an IMF-approved budget plan for the second half of 1998, Mr Kraus' reported view was that "the situation is still difficult, but it should be manageable". This contrasts sharply with his opinion, as set out in the joint memorandum with Mr Lopez-Claros, that by this stage it had become clear that the IMF package had failed and there was a consensus by 23 July 1998 that default or devaluation was inevitable.
699. Moreover, in an article written by Mr Kraus entitled "Surveying the wreckage" and published in the Moscow Times, on 18 September 1998, he reviewed the lead-up to the default. In that article, in which he described himself as "one of the more bearish local analysts for the past year", Mr Kraus wrote of how the default was unexpected by him and by many in the market:

"…I hasten to admit that I never believed that the melt-down scenario would actually occur. Like many of us, in my heart of hearts I knew that Russia was too big, too important to fail. At the very last moment a hand would be extended: the G7, the IMF, God the Father. I remember our relief as we cheered the IMF package – surely the government had finally gotten enough of a scare to mend its ways, and at the very least it had bought us time; three months, six months…Other countries have been forced to choose between devaluation and default. Only Russia did both, without so much as a fig leaf of renegotiation…".

He went on to say that it was "quite amazing how many exceedingly intelligent people got slaughtered – bankers, investors, businessmen". He concluded by reiterating his view that Russia should not be allowed to fail by the West:

"…rich neighbours are far safer than poor ones, and it is imperative that the [G7] assist Russia in the building of a functional economy".

There is a clear tension between what he wrote in this article and the views which he expressed in his expert reports. This article clearly showed not only that he was expressing the view that he never believed that the default would happen, but also that there was a substantial body of others who shared that view.

700. Finally, I did not accept Mr Kraus' evidence that the yield spreads on Russian Sovereign Eurobonds and the yields on GKOs were, at the time, an obvious contemporaneous indicator of market consensus as to risks of devaluation and default respectively. Hindsight interpretation of long term trends may have shown this to be the case, but at the time I conclude that such yield spreads and yields would not have been an indicator to a salesman like JA that his views were wrong. The experts agreed that there were often short term factors in the market that could cause spreads on such bonds to widen, that were unrelated to the risk of sovereign default or devaluation. These included fluctuations in risk tolerance, large buy/sell orders, unwinding of spread trades and contagion from events in other markets. The contemporaneous published views did not support the theory that such yield spreads were at the time clear indicators of sovereign default or devaluation. Thus, for example, the Chase research article Next Week, dated 5 June 1998 reported a tightening of the spread in relation to a 3 June Eurobond; this had been issued at a premium, so that the spread was about 50bps wider than the spread on the Russia 07 bond, but the spread quickly tightened in after-market trading, so that, two days later, it was trading at a spread to Treasuries 10bps inside the Russia 07 Eurobonds. The article stated:

"Investors will be increasingly convinced that the rouble will not be devalued in the short term and that GKOs will settle in the 40% to 60% yield range. This stability, combined with generally positive announcements from the [G7 meeting] should underpin the bottom of the range for external debt prices. … In this environment, we expect volatility to decline and the Russian [yield] curve to continue to normalise". My emphasis.]

The expert evidence showed that it was a common phenomenon in emerging markets (and not just Russia), particularly in the wake of the Asian crisis, that short term factors skewed bond spreads.

701. In the circumstances, my conclusion is that, when one analyses, in the proper context of the entirety of the conversations, what JA actually said (rather than simply the odd sentence here and there, taken out of context), the statements which he made, or the views which he expressed, about Russia or the Russian economy (on the assumption that they were indeed actionable representations), were not false, or made negligently, even if they turned out to be wrong, or over-optimistic. He had reasonable grounds for expressing the views which he did since others in the market shared those views. Moreover, in many cases, one cannot distil out of the words actually used by JA, the type of broad warranty-type representations that Springwell alleges that JA made.
702. So far as reliance is concerned, if one gets to that stage, it is fair to say that, in a general sense, as Mr Brindle submitted, AP relied upon JA's expressed – and frequently positive - views and recommendations about Russia, which no doubt bolstered AP's desire to take advantage of the substantial returns that were available and his decisions to invest. But it was clear from the telephone conversations that AP himself was clearly aware of the volatile nature of the Russian market and the risks involved in investing there, and that he was not convinced as to the underlying fundamentals of the Russian economy. A good example of this is a conversation on 21 July 1998, where AP said to JA "I don't personally have any faith in Russia". AP stated in this conversation that he had built up a position in Prins as a "gamble" in order to take advantage of their volatility and make huge profits when the "life saver" of the IMF package arrived, but that he now realised that gamble had not succeeded and that Russia would require "real improvement" in the economy as opposed to the lifesaver of the IMF package. Thus, as Mr Hapgood submitted, despite the case advanced to the effect that AP relied on JA's characterisation of the Russian economy as "good" and not a cause for concern, AP made it clear in this conversation that he had not relied on any assessment to that effect at all, and that he personally had never believed in the fundamentals of Russia but was wishing to make a technical play by effectively buying the rumour and selling the fact. There are also examples of AP ignoring JA's recommendations or doing the opposite in some cases, in relation to several of the alleged misrepresentations said to have induced Springwell to buy or to continue to hold investments.
703. Thus, if it were relevant, I would not conclude that Springwell could not establish reliance at this stage. However, in my judgment, in order to determine whether Springwell had indeed so relied on any particular representation, it would be necessary, by reference to Springwell's schedule, to analyse each alleged representation in connection with each transaction it is alleged to have induced, or, if relevant, each decision to continue to hold it is alleged to have induced. I have not conducted that exercise, given my prior conclusions in relation to the Relevant Provisions and the fact that I do not consider that any misrepresentations were made under this head.

Alleged misrepresentations about the GKO-Linked Notes

704. These are the alleged representations made in sub-paragraphs 23(10) – (13) of the List of Issues. They are:

i) the hedged GKO-linked Notes were without currency risk;

ii) the GKO-linked Notes were straight-forward investments, alternatively straight-forward investments akin to time deposits and/or money market instruments;

iii) the GKO-linked Notes were liquid investments, alternatively investments with a high degree of liquidity akin to that associated with time deposits or money market instruments;

iv) the GKO-linked Notes were conservative and secure investments.

705. The thrust of Springwell's case under this head was that it was because AP believed that the GKO-linked Notes were conservative, liquid and without currency risk (as a result of the way JA had allegedly misrepresented them), that AP was willing to build up such a substantial portfolio of them, and effectively discounted them as part of his Russian portfolio. In other words, submitted Mr Brindle, AP's appetite for the GKO-linked Notes was a product of the way they had been presented to him, and the role AP believed they played in his portfolio as a result (i.e. cash-equivalent instruments), not just the fact that JA had recommended them.
706. As to the first alleged misrepresentation (namely that the hedged GKO-linked Notes were without currency risk), the contractual position was that the Notes contained a forward foreign currency contract, so that there was in place a rouble/USD hedge and, thus, a contractual protection against rouble devaluation. The actual thrust of Springwell's case under this head appeared to be that, in reality, JA represented that AP had absolute protection against any possible rouble devaluation, i.e. that the forwards would in every circumstance convert the rouble maturity of the GKOs into dollars. My analysis, in their full context, of the particular statements made by JA, which are relied upon by Springwell as constituting the alleged representation, is that they do not amount to the representation pleaded by Springwell. If one reads through the various telephone conversations between AP and JA, putting the various statements in their context, the clear impression that one is left with is that JA was doing no more than saying that the forward currency hedges, if they paid, removed the risk of currency fluctuations on the GKO-Linked Notes; in other words, that the currency risks were hedged. But he was not promising that, in all circumstances, the hedge contracts would pay out in full, or that the hedge contracts were without any risk whatsoever. Indeed, in many of the conversations, JA and AP discussed the relative credit quality of the bank counterparties to the hedge contracts, and the fact that the price of a better quality hedge was a lower yield, which demonstrates that AP clearly appreciated that there was counterparty risk in the event of devaluation and that there could not be absolute protection through the use of a forward currency contract in such event. I accept JA's evidence that he explained the effect of the forward contracts to AP and the fact that the scale of the risk of devaluation depended upon the quality of the bank providing the forward. That is entirely consistent with the conversations where such matters were discussed. Indeed, in cross-examination AP accepted that he appreciated the correlation between risk and yield in relation to the hedge contracts.
707. The second and third representations (namely that the GKO-linked Notes were straight-forward liquid investments, alternatively investments with a high degree of liquidity, akin to time deposits and/or money market instruments) can be taken together. What Springwell alleges is two-fold; first, that JA referred to the Notes in a certain way; and second that, in so doing, he, by implication, gave a particular impression as to the structure, risk profile and liquidity of the Notes. Springwell does not allege that JA made any express representations to such effect. In his telephone conversations with AP, JA variously referred to the Notes as: "short term Russian treasury bills"; "short dated CDs", "short dated stuff", "cash management stuff"; and "money market stuff" (i.e. short maturities). Internally within Chase, JA referred to the Notes as "Russian CDs" or "Russian CD stuff"; and said "GKO is just a generic term for treasury bills".
708. However, I do not consider that, in context, JA can be taken as representing to AP that the Notes had all the risk and liquidity characteristics of a time deposit or money market instrument with Chase or another similar Western banking institution, let alone those of a US or UK treasury bond. He never said so expressly and, in context, I do not think that he can have been taken to have done so by implication. The relevant context at all times was that JA and AP were operating in an emerging markets environment, not in an investment grade environment, as AP was well aware. In none of the conversations was JA seeking to explain the characteristics of the Notes. In using the description which he did, he was, in my view, merely referring to the Notes by way of shorthand identification. The terms used by JA must be seen in the context of an established trading relationship with AP. Springwell had purchased its first GKO-Linked Note in early 1996. By 13 May 1997, the date of the first transcript relied on, it had bought 15 Notes. Thus the Notes were instruments with which AP was by this stage entirely familiar. I reject the suggestion that he was unaware of the risks that were attached to the Notes JA's evidence, which I accept, was to the effect that he did indeed in general terms explain the outline structure and risks of the Notes to AP. In any event, the structure and risk characteristics of the Notes were clearly set out in the term sheets.
709. Springwell's case was that JA represented that the Notes had characteristics akin to time deposits or money market instruments. But in none of the transcripts did JA refer to the Notes as time deposits. So far as the term "cash management" is concerned, again, this cannot amount to a representation as to the risk or security characteristics of the Notes. I accept Mr Hapgood's submission that this was no more than a reference to the use to which Springwell was in fact putting the GKO–Linked Notes in managing its liquidity. As AP explained in evidence, and as indeed was the case, Springwell had, at least at all relevant times before the default, "tremendous liquidity" in the GKO–Linked Notes.
710. Finally, in this context, given AP's knowledge as to the type of instruments in which he was dealing, I find it to have been highly unlikely that that AP would have placed any reliance on JA's use of terminology to convince himself that such shorthand, informal terms were somehow conveying that Springwell was investing in investments that were equivalent to investment grade assets.
711. Likewise, in relation to the third allegation, that JA represented that the GKO–Linked Notes were "conservative and secure investments", for similar reasons I find that, on a proper analysis of what JA actually said, no such statement in such absolute terms was ever made. JA certainly considered, and expressed the view that, the Notes were attractive investments for Springwell. Thus JA certainly believed that, for Springwell, the yield on the GKO–Linked Notes and their short term nature, when balanced against the risk, produced an attractive investment. However, he never described the Notes as "straightforward". Indeed, far from being "conservative and secure", JA had discussed the risks with AP and AP knew that the Notes carried particular risks. JA did describe the Notes internally as "conservative" to SG, but this was in the context of a discussion about concentration limits where JA was trying to explain to SG why Springwell has such a large concentration in Russia. The fact that Springwell had various Chase hedges was also a factor why JA regarded Springwell's position as conservative. In any event, internal Chase conversations cannot form the basis of representations made to Springwell.

Alleged misrepresentations about Russian Banks

712. These alleged misrepresentations are reflected in sub-paragraphs 23(9)and (15)-(17) of the List of Issues. These are to the effect that:

i) the forward contracts for hedged GKO-linked Notes were always with Chase or with first class Russian banks;

ii) the Unexim eurobonds which Springwell purchased were high-quality and/or low risk and/or conservative and secure;

iii) the Rossiyskiy Kredit eurobonds which Springwell purchased were high quality and/or low risk and/or conservative and secure;

iv) the VTB FRNs which Springwell purchased were high-quality and/or low risk and/or conservative and secure.

713. Again, I conclude, on an analysis of what was actually said by JA in the various telephone conversations, that no such express, or unqualified, representations in such terms were made. The comments set out in Springwell's schedule under these heads are very selective, and do not convey the full picture of what JA was actually saying. On a fair reading, the positive comments which JA did make about the various banks and their relative standings, or that the particular investments were "attractive", were always made in the framework that any Russian bank, however relatively prestigious to its competitors, was subject to the risks attached to the Russian banking system as a whole. He pointed out that, if there were to be a big devaluation in Russia, there would be serious problems for the Russian banks. AP, in my view, did not for a moment think, as a result of what JA had told him, that there was no difference between the risks inherent in dealing with Western banks, as compared with the risks inherent in dealing with Russian banks. He and JA discussed rumours or volatility affecting various banks and, indeed, AP himself raised questions about the possibility of banks failing. I do not consider that he laboured under the delusion either that the particular Russian banks in question were "secure or conservative" investments in absolute terms, or that they were comparable to investments in a US or western European bank. I conclude that by 1997 AP was an experienced investor in emerging markets and knew that the systems, structures and institutions of emerging markets countries was not equal to those of emerged or developed countries. He not only understood the risks inherent in the higher yields of emerging markets generally but was also deliberately seeking distressed corporate debt in Russia. His investments in Russian Banks, followed after Springwell's attempt to secure significant capital gains through a similar strategy with Indonesian corporate bonds.
714. Moreover, the positive statements which JA actually made to AP about Unexim, VTB and Rossiyskiy Kredit banks cannot, in my judgment, be characterised as misleading. Ms McLeod-Wilson's evidence was to the effect that all of these Russian banks were:

"… large well known Russian banks and could reasonably be described by an emerging markets professional as 'first class Russian banks'".^[214]

I conclude that there are no grounds made out to support the alleged misrepresentations in relation to any of these three institutions.

Representations about the Ukraine Note

715. The alleged misrepresentations under this head, which are reflected in sub-paragraphs 23(18) – (19) of the List of Issues are that:

i) the Ukraine Note which Springwell purchased was a Eurobond; and

ii) Ukraine had virtually no foreign debt.

716. In a conversation on 7 January 1998, JA made the following statements in a brief conversation about the Ukraine investment :

i) JA told AP that Ukraine "only have one bond outstanding" and "that is a bond that has a final maturity on…21 October 1998, ..so again we're talking about short dates here." AP asked whether the Ukraine investment was a "swap with the dollars" and JA responded "No, that's dollar denominated assets, that is regular dollars".

ii) JA told AP "Chase likes Ukraine. Ukraine has virtually no foreign debt".

717. Chase accepted that these statements by JA did amount to statements of fact rather than mere opinion. However, Chase submitted that it was clear from what followed that AP did not rely on them at all in relation to his purchase of the Ukraine Note.
718. The actual factual situation was as follows. As at 1 January 1998, according to Appendix 12 to Ms Mcleod-Wilson's first report, Ukraine had a total of $9,553 million outstanding in external debt to non-Ukrainian creditors, which represented 19.3% of Ukraine's GDP. Of this, $628 million (1.2% of GDP) was owed in respect of Eurobonds or to banks.
719. Ms Mcleod-Wilson described this $628 million as representing "London Club" or commercial debts, and opined that, for practical purposes, an emerging markets salesman would usually have regard only to London club debt of a country (i.e. commercial debt) rather than to Paris club debt (i.e. multilateral agency debt). Thus she expressed the view that the figure of $628 million was indeed a "negligible amount" and that, accordingly, viewed in the context of purely commercial debt, JA's statement was accurate and reasonable. However, in my view, AP would not have appreciated this fine distinction and thus I conclude that the statement "Ukraine has virtually no foreign debt" was incorrect and could be characterised as a misrepresentation.
720. However I do not consider that JA represented to AP that the Ukraine Note which Springwell was purchasing was a Eurobond. I accept Chase's submission that it was clear from AP's question to JA as to whether it was a "swap", that AP did not understand JA's previous comment to be to the effect that the Ukraine Note was a Eurobond. In fact, the expert evidence showed that Ukraine did have only one bond outstanding in January 1998. Although Ms Mcleod-Wilson stated that she agreed with Mr Kraus that it would be "incorrect to call this an investment in a Eurobond if it was not", as I do not construe JA's statement as a representation that the Ukraine investment was in a Eurobond, that point is irrelevant. He referred to the note as a "bond", and to that extent the representation was inaccurate as the investment was in fact in a loan note.
721. However, even if I were wrong on this point, and JA made misrepresentations both as to the state of Ukraine's external debt and as to the Note being a Eurobond, or as to it being a bond rather than a loan note, my analysis of AP's evidence^[215] is that he was not induced to make the purchase as a result of any such misrepresentations as to what were, in reality, very minor matters in the context of his decision making process. The evidence showed that what persuaded him to purchase the Ukraine Note on this occasion, apart from the price and the potential high yield, was JA's statement that Chase "likes Ukraine". That statement was true. I have no doubt that, had JA recommended this on the basis that Ukraine's outstanding external London Club/commercial debt was low (and explained what this meant), that Ukraine had other external non-commercial debt, that the Note was a way of taking an interest in a high-yielding Ukrainian debt, and that Chase "liked Ukraine", AP would likewise have invested in the Note.
722. Furthermore the amount of the investment in the Ukraine Note was the relatively small sum of $5 million. By January 1998, the evidence showed that AP regarded this sort of sum as loose change, or "bookkeeping". AP also confirmed in cross-examination that he was happy to have small amounts invested in higher risk investments, although he purported to limit this to 1.5% to 3% of Springwell's portfolio. He had not been put off investing in the first Ukraine structured investment, which Springwell had purchased six months earlier, which was not dollar denominated, and which was highly structured and illiquid. In relation to this earlier investment, JA had pointed out that the Note "has the capability for you to lose your principal… if there is a maxi devaluation in the Ukraine". But AP was sanguine in response, and in agreeing to buy the Note, told JA that the same had applied when Springwell purchased its unhedged GKO-Linked Note at 200%. Given that the Ukraine Note that AP purchased in January 1998 was much less risky than the first Ukraine investment, and given AP's admittedly relaxed approach to investments of $5 million or less, I conclude that it almost inconceivable that AP would not have purchased the Note but for JA's mentioning it being a "bond", rather than a note, or but for the statement about external debt

Conclusion on the misrepresentation claim

723. For these reasons, in addition to my conclusion in relation to the Relevant Provisions, I conclude that Springwell's claims in misrepresentation fail.

Section VIII: Breach of fiduciary duty claim – Issues 3.1 – 3.4

Summary of the breach of fiduciary duty claimsError! Reference source not found.

724. I have already, in an earlier part of this judgment, ruled against Springwell's contention, in relation to the issue set out at paragraph 42 of the List of Issues, that its relationship with Chase imposed on the latter a full range of alleged fiduciary obligations, such that it was in breach of those obligations in failing to advise Springwell either adequately or at all as to the nature and effect of the Relevant Provisions. I have concluded that there was no justification on this ground for striking down the Relevant Provisions.
725. I should, in this context, also state my finding that there was no basis for the allegation made (if it was still pursued) that "Chase knowingly created false records so as to justify ex post facto its "inappropriate" relationship with Springwell"^[216] There was no evidential basis for such an allegation. Thus there was no evidence that Chase ever considered that JA had an "inappropriate" relationship with Springwell or that Chase would ever have created false documents to cover this up. Sensibly, Springwell did not try to prove the allegation at trial.
726. The second allegation made by Springwell, based upon an alleged breach of fiduciary duty, reflects the issue set out at paragraph 43 of the List of Issues, namely that, in proposing Russian, former Soviet Union and Indonesian investments to Springwell in and after October 1997, CMB and CMIL (by JA) acted in breach of fiduciary duty: (i) by not acting in the best interests of Springwell but by acting in the interests of Chase; and (ii) by consciously taking advantage of AP's lack of expertise, knowledge and resources to sell Springwell inappropriate investments. These allegations were pleaded in terms that Chase deliberately did not "control" JA's dealings with Springwell because Springwell was a very profitable client;^[217] that Springwell was a "stuffee", namely a client who could be stuffed with paper which nobody else would buy;^[218] and that JA took advantage of AP when he knew or ought to have known that any fair presentation of the risks involved in purchasing Russian paper would lead him not to purchase it^[219].
727. In the course of the trial, Springwell abandoned its claim that Chase sold it GKO-linked Notes in order to reduce Chase's own exposure to the GKO market or that Springwell was a "stuffee". In my judgment, it was right to do so as there was, in the event, no evidence which on proper analysis supported the allegation. The allegation was clearly rebutted by the evidence of Daniel Pinto ("DP"), JA and others.
728. The third allegation made by Springwell, based upon an alleged breach of fiduciary duty, reflects the issue set out at paragraph 44 of the List of Issues, namely that CMB, CIBL and/or CMIL made excessive and unusually large profits at Springwell's expense from their dealings and acted in breach of fiduciary duty: (i) by failing to disclose and by not seeking consent to profits at that level and/or (ii) by consciously taking advantage of AP's trust and confidence in JA, knowing that AP would not query the pricing with him and knowing that AP had neither the expertise nor the technical resources to check the pricing of the instruments for himself.^[220]

The allegation that Chase deliberately did not "control" JA's dealings with Springwell because Springwell was a very profitable client etc.

729. In essence the principal thrust of this second allegation was to the effect that JA's supervisors were so grateful for the profits generated by Springwell that they deliberately turned a blind eye to the manner in which JA generated those profits. The allegation was not put to JA's supervisors from Chase, who were called to give evidence. The allegation had no evidential basis and, in my judgment, should never have been made.
730. In so far as the allegation was "merely" that Chase took advantage of Springwell, and put its own interests above those of Springwell in recommending the Russian and Indonesian investments to the latter, when Chase knew that it had no means to form an independent judgment about the advisability of making such investments, I likewise reject the allegation, which, in reality, is a serious allegation of conscious professional impropriety. There was no evidential basis for the allegation. The particular instruments which AP bought in this context were fully consistent with his investment objectives and attitude to risk. There was no of evidence to support a case that JA in any relevant sense acted in conscious breach, or that he deliberately took advantage of AP in any way. I accept his evidence, supported by the transcripts, that he sought at all times to provide an honest and fair service to Springwell, since that was both in Chase's interests and in Springwell's. AP could and would have gone elsewhere had it considered Chase's prices uncompetitive.

The third allegation, namely that CMB, CIBL and/or CMIL made excessive and unusually large profits at Springwell's expense from their dealings

731. Under this head Springwell sought an account of allegedly excessive profits made by Chase. The nature of the allegation is that it was an incident of the alleged fiduciary duty owed by Chase to Springwell that

"insofar as Chase proposed to make an unusually large profit at Springwell's expense, it could only do so after full disclosure to Springwell and after having obtained Springwell's consent."^[221]

732. On this basis, Springwell then alleged two types of breach:

i) It claimed that the pricing of GKO-Linked Notes "was such as to earn for Chase a profit greatly in excess of the profit usually earned in the market on structured products of this kind."^[222] It alleged that the profit margin was 10% , which it contends was greatly in excess of what was usual.

ii) It further claimed generally that

a) "throughout its dealings with Springwell Chase was earning excessive profits on the transactions which it was bound to disclose."^[223]

b) It relied in support of this claim on a document which it said showed that Springwell generated in 1997 "the highest amount of commission of all clients of Chase's fixed income department."^[224]

733. I reject this claim. First, as I have already held there was no fiduciary relationship between Chase and Springwell. The supposedly excess profits were generated on the sale and purchase of instruments. By the very nature of the transactions in question, Chase was on one side of the transaction as vendor, and Springwell was on the other as purchaser. The profitability of the transaction was a matter for each party. If AP did not like the prices Chase was offering, he could have sought quotes from ML or any other of Chase's numerous competitors in the market. The context does not suggest the existence of any fiduciary relationship.
734. Second, the Relevant Provisions expressly excluded any such fiduciary obligations. As I have already set out, the DDCS letters provided in the following terms:

"Neither CMB nor CIBL will be under a duty to secure best execution in respect of any transaction or accept from you an order placed on a "best execution" basis. As a result, neither CMB nor CIBL will be required to ascertain the best available price in the relevant market for transactions of the kind and size concerned nor effect transactions for you at a price which is no less advantageous to you in every transaction. In having no such duty, neither CMB nor CIBL have any obligation to disclose any remuneration which they or any third party with whom you or they may effect the transaction might receive."

These provisions made it clear that the level of profit earned by Chase was simply not a matter about which Springwell was entitled to complain, other than by deciding not to do any further business with Chase.

735. Third, the terms of the DDCS letters were not inconsistent with any belief, understanding or intention of AP. AP made it clear in his evidence that he was never in any way concerned with the level of profits generated by Chase:

"Q. And you fully understood that in all these transactions Chase and Springwell were market counterparties; one was buying and one was selling in each transaction.

A. I thought that we were both in a situation that we were doing well. Justin was doing well for Chase and himself and I was doing well for Springwell. That means that there was no adversary situation because I was happy to invest in a certain product and Justin was happy to sell that product to us.

Now, what money Chase would be making out of that or what returns it would have from that investment, that was of no concern -- let's say it was of no concern to me about how much money they would be making. I did not see the fact that he was selling and making a commission as something which would be against my interests."^[225]

736. In the circumstances, Springwell has no basis to claim an account of allegedly excessive profits, whether on a fiduciary basis or otherwise. Nor did the evidence support any case that the profits in fact earned by Chase, whether on the GKO-Linked Notes or otherwise, were excessive. It is not necessary for me to analyse the evidence in this respect.

Conclusion on the alleged breach of fiduciary duty claim

737. Accordingly, I find against Springwell on this claim. In the circumstances, it is not necessary to consider the availability or otherwise of a contributory negligence defence under this head.

Section IX: Post-default Claims: Issues 4.1 to 4.2.3

738. As indicated to counsel, these claims, reflected in paragraphs 47- 61 of the List of Issues, which are entirely separate in nature from the pre-default claims, will be the subject of a separate judgment.

Section X: Conclusion

739. It follows that I dismiss Springwell's action in relation to the pre-default claims.
740. In concluding I should mention two further points.
741. First, there were numerous subsidiary issues and arguments, both of fact and of law, raised in evidence at trial or in written or oral submissions, which necessarily have not been expressly dealt with in this judgment, given the constraints of length and time. However, such matters have been taken into account by me in coming to my conclusions.
742. Second, I could not end this judgment without complimenting the respective legal teams on both sides as to the exemplary way this long and complex commercial trial has been conducted. The presentation of evidence and argument was concluded within the indicated time limits. The written arguments, although perhaps tending on occasions to be overly long, were of invaluable assistance, and I express my gratitude for the assistance which I have received from them. The use of information technology was highly efficient. Whilst, with the benefit of hindsight, I consider that it might have been preferable to have tried some key issues as preliminary issues, that is perhaps an easier call to make at the end of a trial, rather than at the beginning. Finally, and importantly, I should also say that, although this was a hotly contested case, raising difficult, and, at times, unpleasant issues, the clients who participated in the trial process, were unfailingly polite and courteous, not only to the Court, but also to opposing counsel.

Note 1    See paragraph 246 of Springwell’s Re-re-re-re Amended Defence and Counterclaim (“RADC”).    [Back]

Note 2    I.e. used as security to enable Springwell to borrow from Chase to fund its large purchases of emerging markets securities.     [Back]

Note 3    See RADC, paragraph 73.    [Back]

Note 4    See paragraphs 144-147 of Springwell’s written closing submissions.    [Back]

Note 5    Springwell Further Information (“FI”) dated 30.07.04, Answer 23.    [Back]

Note 6    Springwell FI dated 30.07.04, Answer 23.    [Back]

Note 7    See paragraph 34 of the RADC.    [Back]

Note 8    See paragraph 35 of the RADC.    [Back]

Note 9    See paragraph 52 of the RADC.    [Back]

Note 10    See paragraph 54 of the RADC.    [Back]

Note 11    See paragraph 55 of the RADC.    [Back]

Note 12    See paragraph 58 (b) of the RADC.    [Back]

Note 13    See paragraphs 58 (c) of the RADC.    [Back]

Note 14    See paragraph 59(b) of the RADC.    [Back]

Note 15    See paragraph 70 of the RADC.    [Back]

Note 16    [2006] UKHL 28; [2007] 1 AC 181 (HL), at paragraphs 92 and 93.    [Back]

Note 17    As presented in reply; see the transcript of Day 68 pp 74et seq; and his supplemental written submissions: Note on the Advisory Relationship.    [Back]

Note 18    RADC paragraph 74.    [Back]

Note 19    Springwell FI dated 30.07.04, Answer 13.    [Back]

Note 20    See Williams v Natural Life Health Foods Ltd [1988] 1WLR 830 (HL) at 835F.    [Back]

Note 21    [1964] AC 465 (HL).    [Back]

Note 22    Supra.    [Back]

Note 23    [2007] 1 AC 181 at [189]; [2006] UKHL 28 at [4] per Lord Bingham.    [Back]

Note 24    [2007] 1 AC 181 at [192] per Lord Bingham at paragraph [8].    [Back]

Note 25    At paragraphs 35 to 36.    [Back]

Note 26    [1998] 1 WLR 830 (HL) at 835F per Lord Steyn.    [Back]

Note 27    [1996] CLC 518 at 575-6.    [Back]

Note 28    Supra.    [Back]

Note 29    At page 530A-B.    [Back]

Note 30    Foreshadowed by some of the factual circumstances alleged in Springwell’s pleading.    [Back]

Note 31    Paragraph 87 of Springwell’s closing submissions.    [Back]

Note 32    The two caveats were: “(1) That, as appeared to be common ground during the cross-examination of AP, AP only embarked upon a trading strategy (i.e. buying with a view to selling at a profit rather than holding to maturity) in the last 9-10 months before the Russian default (and then only with a part of the portfolio); and (2) AP’s familiarity with emerging market investments (such as it was) inevitably grew with time. In that sense, the conversations in 1998 will not have been representative of the sort of conversations which JA and AP were having in 1990.”    [Back]

Note 33    The reference to “ECP sales teams” ought to have been to “ECP sales team”, as CA accepted.    [Back]

Note 34    Day 16 (21/05/07), 49-50.    [Back]

Note 35    AP 1st witness statement paragraph 100.    [Back]

Note 36    Day 16 (21/05/07), 56.    [Back]

Note 37    Day 7 (02/05/07), 33/21-32/5.    [Back]

Note 38    Day 7 (02/05/07), 22/3-8.    [Back]

Note 39    Day 16 (21/05/07), 48/2-6.    [Back]

Note 40    Day 16 (21/05/07), 90/6-7.    [Back]

Note 41    RADC paragraph 60.    [Back]

Note 42    Day 8 (03/05/07), 4/4-8.    [Back]

Note 43    Day 7 (02/05/07), 23/8-16.    [Back]

Note 44    [1998] 2 BCLC 282.    [Back]

Note 45    See paragraph 54(b) of the RADC: “[JA] was part of [EM]’s team at Chase and his work would be subject to [EM]’s supervision and control.    [Back]

Note 46    Day 7 (02/05/07), 19/13-21.    [Back]

Note 47    Day 16 (21/05/07), 48/2-6.    [Back]

Note 48    Day 16 (21/05/07), 49/2-4.    [Back]

Note 49    Day 16 (21/05/07), 69/16-70/1.    [Back]

Note 50    Day 16 (21/05/07), 75/24-76/6.    [Back]

Note 51    Day 18 (23/05/07), 109/6-8.    [Back]

Note 52    Day 22 (06/06/07) 84/11-14.     [Back]

Note 53    See Day 24 (18/06/07), 52-56.    [Back]

Note 54    Day 46 (18/07/07), 40/23-41/15.    [Back]

Note 55    RC witness statement, paragraph 53; Day 46 (18/7/07), 167/11-18.    [Back]

Note 56    RADC paragraph 70(d), paragraph 72(b).    [Back]

Note 57    Day 7 (02/05/07), 29/16 -31/25.    [Back]

Note 58    RADC paragraph 100.    [Back]

Note 59    Springwell’s Reply, paragraph 15.    [Back]

Note 60    Day 8 (03/05/07), 138/13-18; 143/25-144/11.    [Back]

Note 61    Day 15 (18/05/07), 9/16-20.    [Back]

Note 62    I.e. a decrease in the downpayment which Springwell had to make in respect of leveraged purchases.    [Back]

Note 63    Day 23 (07/06/07), 18/24-19/3.    [Back]

Note 64    Day 23 (07/06/07), 21/3-22.    [Back]

Note 65    Day 23 (07/06/07), 65/10-20.    [Back]

Note 66    Day 24 (08/06/07), 43/25 - 45/7.    [Back]

Note 67    Day 24 (08/06/07), 63/10-16.    [Back]

Note 68    Rule 5-31.    [Back]

Note 69    Rule 5-30.    [Back]

Note 70    Rule 5-5(1).    [Back]

Note 71    Rule 5-5(2).    [Back]

Note 72    Day 9 (08/05/07), 41/10-42/2.    [Back]

Note 73    Day 10 (09/05/07), 129:18-131:13.    [Back]

Note 74    Day 10 (09.05.07), 132-133.    [Back]

Note 75    Day 10 (09.05.07), 137:15-24.    [Back]

Note 76    Day 10 (09.05.07), 144:19-145:9.    [Back]

Note 77    Day 33 (26/06/07), 148/24-149/1.     [Back]

Note 78    See e.g. Reply at paragraph 79(h).    [Back]

Note 79    McLeod-Wilson 1st report; Appendix 13, paragraph 5.    [Back]

Note 80    Day 8 (03/05/07), 84/18-23.    [Back]

Note 81    Springwell FI 30/7/04 Ans 17     [Back]

Note 82    Springwell FI 30/7/04 Ans 14 A2/144.    [Back]

Note 83    T45 (20/6/97) P33/140 at 147.    [Back]

Note 84    Measured in terms of face value.    [Back]

Note 85    Measured in terms of face value.    [Back]

Note 86    Measured in terms of market value.    [Back]

Note 87    Lopez-Claros 1st Report, paragraph 56.     [Back]

Note 88    Kraus 1st Report, paragraph 118 et seq.    [Back]

Note 89    CEMEA stands for Central and Eastern Europe, Middle East and Africa.    [Back]

Note 90    Springwell’s Reply paragraph 28(e) and 34(b) A5/45, 48.    [Back]

Note 91    Springwell’s Reply paragraph 28(b).    [Back]

Note 92    RADC paragraphs 172-178 A1/73-74; Springwell’s written opening paragraph 266.    [Back]

Note 93    RADC paragraph 57(c).    [Back]

Note 94    Day 47 (19/7/07) 8/16-19.    [Back]

Note 95    Day 47(19/7/07) 35-48.    [Back]

Note 96    Day 56 (2/8/07) 64.    [Back]

Note 97    These Notes were in force from 16 July 1993; whether there was an earlier explanation of the term was not known.    [Back]

Note 98    A fund investing in Central and Eastern Europe and Russian Equities promoted by the Republic National Bank of New York, in Geneva.    [Back]

Note 99    As JJ explained in the passage quoted above.    [Back]

Note 100    See e.g. paragraph 70 of the RADC.    [Back]

Note 101    Springwell’s Reply, paragraph 35B. See also the passage from AP’s evidence quoted above.    [Back]

Note 102    [1996] CLC 518 at 575-6.    [Back]

Note 103    [1995] 2 AC 145, at 206.    [Back]

Note 104    The documentation relied upon by Chase consisted of: (i) the wholesale counterparty notice (which I disregard for the reasons given above); (ii) confirms under the original Investment Grade Facility; (iii) the MFA; (iv) confirms under the MFA; (v) the DDCS letters; (vi) the Global Investor Service Account Agreement (which I likewise disregard for the reasons given above); (vii) the GMRA; (viii) confirms under the GMRA; and (ix) the GKO-Linked Notes and related documents.    [Back]

Note 105    [2006] EWHC 2887 (Comm).    [Back]

Note 106    [2007] EWCA Civ 811.    [Back]

Note 107    At paragraph 40.    [Back]

Note 108    At paragraph71.    [Back]

Note 109    [2007] EWCA Civ 811 at [28].    [Back]

Note 110    [2006] EWCA Civ 386; [2006] 2 Lloyd’s Rep 511.    [Back]

Note 111    At paragraph 43.    [Back]

Note 112    [2004] EWHC 2471 (Comm).    [Back]

Note 113    Paragraph 29.    [Back]

Note 114    Paragraph 66.    [Back]

Note 115    Paragraph 69.    [Back]

Note 116    [1996] CLC 518.    [Back]

Note 117    At pages 574-575; see also page 533.    [Back]

Note 118    L8/209 at 574.    [Back]

Note 119    L8/211 at 576    [Back]

Note 120    Wood, Regulation of International Finance (Sweet & Maxwell, London 2007) paragraph 14-16.    [Back]

Note 121    Springwell’s Reply paragraph 54-159.    [Back]

Note 122    Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, at 912.    [Back]

Note 123    Chitty on Contracts (29th edition), Sweet & Maxwell, London 2004); at paragraph 12-057.    [Back]

Note 124    Springwell’s Reply paragraph 58.    [Back]

Note 125    Springwell’s Reply paragraph 77; paragraphs 97-98; paragraph 100A; paragraph 107.    [Back]

Note 126    Springwell’s Reply paragraph 77; paragraph 100A.    [Back]

Note 127    Springwell’s Reply paragraph 77; paragraph 100A.    [Back]

Note 128    This is a quote from the 1993 Letter but they are all in similar terms.     [Back]

Note 129    Springwell’s Reply paragraph 97-8; paragraph 107.    [Back]

Note 130    The 1997 DDCS Letter uses the word “issues” not “issuers” but that makes no difference to the point in contention.     [Back]

Note 131    The Failed Notes were issued by CMSCI. The Performing Notes had been issued initially by CRV Finance (Jersey) Limited (a company incorporated in Jersey) and then by CMSCI (also incorporated in Jersey).    [Back]

Note 132    Springwell’s Reply paragraph 109.    [Back]

Note 133    Springwell’s Reply paragraph 135-6.    [Back]

Note 134    As originally stated in Springwell’s Reply paragraph 139.    [Back]

Note 135    [1960] 1WLR 196 (CA).    [Back]

Note 136    Unreported ,CA 27 October 1999.    [Back]

Note 137    29th Edition, paragraph 14-133.    [Back]

Note 138    At page 205.    [Back]

Note 139    Supra at pages 31-32.    [Back]

Note 140    [2001] EWCA Civ 317 at paragraphs 40-41.    [Back]

Note 141    At paragraph 52.    [Back]

Note 142    Paragraphs 56-60    [Back]

Note 143    at paragraph 57-58    [Back]

Note 144    at paragraph 70.    [Back]

Note 145    At paragraph 54.    [Back]

Note 146    At paragraph 61.    [Back]

Note 147    At paragraph 68-70.    [Back]

Note 148    [2006] EWHC 3112 (Ch).    [Back]

Note 149    At paragraph 154.    [Back]

Note 150    [2007] EWHC 197 (Comm); [2007] 1 Lloyd’s Rep 397.    [Back]

Note 151    At paragraph 13.    [Back]

Note 152    At paragraph 465.    [Back]

Note 153    At paragraph 57.    [Back]

Note 154    (Supra).    [Back]

Note 155    At paragraph 40.    [Back]

Note 156    At paragraph 56    [Back]

Note 157    [1998] 2 Lloyd’s Rep 139.    [Back]

Note 158    At [168-169].    [Back]

Note 159    At [168].    [Back]

Note 160    P38/46-47.    [Back]

Note 161    (1986) 160 CLR 371.    [Back]

Note 162    [1959] 1 QB 55.    [Back]

Note 163    [1998] Ch 1.    [Back]

Note 164    [2004] EWHC 1235.    [Back]

Note 165    RADC paragraph 80A; Reply paragraphs 145-147.    [Back]

Note 166    RADC paragraph 81.    [Back]

Note 167    RADC paragraph 80, 172-183 and 253.    [Back]

Note 168    [1992] 4 AER 363, at 377    [Back]

Note 169    [1995] 1 AC 74 at 98.    [Back]

Note 170    [1989] 1 QB 433, at 439 et seq    [Back]

Note 171    Reply, paragraph 139(d)    [Back]

Note 172    [2001] EWCA Civ 735; [2001] 2 Lloyd’s Rep 161 at [208]    [Back]

Note 173    At paragraph 209.    [Back]

Note 174    [2003] EWCA Civ 1447; [2003] 2 Lloyd’s Rep 767 at [15].    [Back]

Note 175    [2000] 1 Lloyd’s Rep 446 at [48-49].    [Back]

Note 176    [1997] 2 Lloyds Rep 369, at 384-385.    [Back]

Note 177    See per Rix LJ in HIH at paragraph 211.    [Back]

Note 178    [1984] 1 Lloyds Rep 322 at 329.    [Back]

Note 179    [2004] BLR 249, at paragraph 20.    [Back]

Note 180    [2007] EWHC 32 (Ch) at paragraph 14    [Back]

Note 181    per Lightman J, supra    [Back]

Note 182    [1992] Ch 53 at paragraphs 65-66    [Back]

Note 183    [2006] EWHC 2887 (Comm)    [Back]

Note 184    [2007] EWCA Civ 811 at [28].    [Back]

Note 185    [1980] AC 827, 843.    [Back]

Note 186    See also Watford Electronics v Sanderson [2001] BLR 143 at paragraph 55 per Chadwick LJ.    [Back]

Note 187    [2003] EWCA Civ.570; [2003] 2 Lloyd’s Rep 356, at [31].    [Back]

Note 188    L9/113 at 146.    [Back]

Note 189    Obviously this issue is not defined to refer to, or include, any of Chase’s obligations under the IMAs.    [Back]

Note 190    Paragraph 6.1-2 of his first report.    [Back]

Note 191    First Report, paragraph 110(b).    [Back]

Note 192    Earnings before interest, tax, depreciation and amortisation.    [Back]

Note 193    Ibid. paragraph 133; Second Report, paragraph 17, footnote 1.    [Back]

Note 194    RADC paragraph 244(c).    [Back]

Note 195    Second Report, paragraph 37.    [Back]

Note 196    Day 8 (3/5/07) 57/8-58/4.    [Back]

Note 197    RADC paragraph 219(a)-(c).    [Back]

Note 198    29th Edition, Sweet & Maxwell, 2004, paragraph 6-004.    [Back]

Note 199    Chitty on Contracts paragraph 6-005-6-009; 3.44; Brown v Raphael [1958] Ch 636.    [Back]

Note 200    IFE Fund v Goldman Sachs International [2006] EWHC 2887 (Comm); [2007] 1 Lloyd’s Rep 264.    [Back]

Note 201    Paragraph 6-010. See also Harlingdon and Leinster Fine Art Limited [1991] QB 564.    [Back]

Note 202    [2000] Lloyds Rep IR 335 at paragraph 200.    [Back]

Note 203    [1991] 2 QB 297 (CA).    [Back]

Note 204    Supra, in particular at paragraph 67, per Gage LJ.    [Back]

Note 205    Chase accepts that an example of an exception to this is JA’s statement prior to Springwell’s purchase of the Ukraine Note, where JA said that Ukraine had only one bond outstanding, that what Springwell was buying was a dollar denominated assets, and that Ukraine had “virtually no foreign debt”.    [Back]

Note 206    [1927] AC 177 (PC) at 182-184.    [Back]

Note 207    This evidence was adduced not only in relation to the misrepresentation claim, but also in relation to the advisory claims. Thus, as one of its allegations of breach, Springwell alleged that Chase failed to advise as to these risks, and failed to consider and advise as to suitability, given Springwell’s investment objectives and allegedly conservative attitude to risk.    [Back]

Note 208    Supplemental Report; paragraph 47.    [Back]

Note 209    See her Supplemental Report, paragraph 62.    [Back]

Note 210    Paragraph 1.     [Back]

Note 211    1st report, paragraph 257.     [Back]

Note 212    Day 49 (24/7/07) 51/21-52/3.    [Back]

Note 213    Day 49 (24/7/07) 54/10-19.    [Back]

Note 214    See the Joint Memorandum, Kraus/McLeod-Wilson, paragraph 94.    [Back]

Note 215    See, for example, Day13, pp123- 134, 16/05/07.    [Back]

Note 216    RADC paragraphs 90-91.    [Back]

Note 217    RADC paragraphs 92(a).    [Back]

Note 218    RADC paragraph 92(b).    [Back]

Note 219    RADC paragraph 182.    [Back]

Note 220    RADC paragraphs 216-218 .    [Back]

Note 221    RADC paragraph 81.    [Back]

Note 222    RADC paragraph 216 A1/87.    [Back]

Note 223    RADC paragraph 217 A1/88.    [Back]

Note 224    RADC paragraph 92(a)(iii).    [Back]

Note 225    Day 7 (2/5/07) 22/15-23/5.    [Back]