JP MORGAN CHASE BANK (formerly known as The Chase Manhattan Bank) (a body corporate) and OTHERS v SPRINGWELL NAVIGATION CORPORATION (a body corporate) [2008] EWHC 1186 (Comm)

"… 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 ("

"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: "

"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."

"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."

"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."

"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"

"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] "

"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"

"… 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."

"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] "

"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] "

"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"

"… 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."

"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] "

"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: "

"The writer raised the issue of "

"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."

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

" 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."

"… 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 ("

"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."

"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] "

"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] … "

"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] … "

"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."

"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 …."

"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."

"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."

"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."

" 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."

"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 …."

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

"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."

"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: "

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

"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 …."

"… 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."

"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."

"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."

"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."

"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."

"… 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"

"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 "

"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."

"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."

"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 "

"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: "

"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."

"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]."

"We did not have copies of "

"(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."

"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."

"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: "

"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." "

"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."

"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"

"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"

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

"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."

"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."

"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"

"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."

"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, "

"… 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."

" 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."

"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"

"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. … "

'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.'

"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."

"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."

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

"I know it's going to cost us another five million minimum"

"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…"

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

"… 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. …"

"… 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. …"

"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."

"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." "

'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.'

"… the making of recommendations is central to the function of an institutional salesman."

"… 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."

"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."

"(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 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."

"(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, …"

"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 "

"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."

"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."

"You should also ensure that you fully understand the nature of the transaction and contractual relationship into which you are entering" 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"

"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"

"… trust, not distrust, is also the basis of a bank's dealings with its customers …"

"… 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."

"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."

"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."

"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."

"[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."

"… 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."

"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."

"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… "

"…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 "

"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 "

"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."

"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."

"we're either talking about a 1929 situation… or the opportunity of a lifetime"

"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: "

"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: "

"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"

"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"

"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."

"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] "

"…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…"

"…rich neighbours are far safer than poor ones, and it is imperative that the [G7] assist Russia in the building of a functional economy"

"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 "

"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 "

"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."