Diamantis Diamantides and Jp Morgan Chase Bank and Others; Jp Morgan Chase Bank and Others and Pollux Holding Ltd

This is an appeal against an order of Morison J. made on 28 ^th January 2005 striking out the claim form and particulars of claim in action 2004 Folio 103 and refusing permission to amend the particulars of claim in both actions with a view to consolidating the proceedings.

The facts as I shall describe them for the purposes of this judgment are taken almost entirely from the proposed consolidated particulars of claim. For the purposes of this appeal the allegations set out in that document must be assumed to be true, although in many respects they are hotly contested. The claimant in the second action (2004 Folio 103) , Mr. Diamantides, is a successful Greek shipowner and a wealthy man whose energies are directed to the management of his shipping business. The defendants in the second action and the claimants in the first action (2001 Folio 405) are all members of the JP Morgan Chase banking group and for the purposes of this appeal can be regarded as a single entity. I shall refer to them simply as "the Bank". As part of its business the Bank offers a comprehensive range of private banking facilities to wealthy individuals around the world. I shall refer to that part of its activities as the "private bank". The defendant in the first action (2001 Folio 405) , Pollux Holding Ltd, is a Liberian company that was used by Mr. Diamantides as an investment vehicle from the latter part of 1996.

In 1987 Mr. Diamantides met Mr. Evangelos Mellis who was then a senior executive in the Bank's Global Shipping Group. Later, Mr. Mellis became a Vice President of the private bank at its London office and sought to persuade Mr. Diamantides to become one of the Bank's clients for investment purposes. He assured Mr. Diamantides that the Bank would provide him with exceptional service in the way of looking after his interests and maximising his returns. Some time around the middle of 1990 Mr. Mellis managed to persuade Mr. Diamantides to enter into a relationship with the Bank. On 28 ^th August 1990 he wrote to Mr. Diamantides in the following terms:

"I am writing to let you know how pleased I am that we have established a relationship with you. We have been trying for a long time to get you in the bank; we finally succeeded and I am delighted! I am confident that you will find the experience worthwhile. We look forward to an everlasting relationship for our mutual benefit."

The letter from Mr. Mellis to Mr. Diamantides is the only record, as far as I am aware, of the establishment of a relationship of any kind between Mr. Diamantides and the Bank. However, by the time it was written Mr. Diamantides had already provided a fund of US5 million to the bank for the account of Ursa Navigation Inc. ("Ursa") , another Liberian company which he was then using as an investment vehicle. At around the same time as he made the funds available to Ursa he caused it to enter into a discretionary management agreement with the Bank under which the Bank was given absolute discretion to make use of the fund to acquire and manage a portfolio of investments on its behalf. That management agreement was contained in a letter from the Bank to Ursa dated 26 ^th July 1990 which was counter-signed by Ursa on 2 ^nd August 1990.

5. From about August 1990 the Bank acquired a portfolio of investments in the name of Ursa using funds provided by Mr. Diamantides. Towards the end of the year Mr. Mellis introduced Mr. Diamantides to a Mr. Justin Atkinson, an employee of the Bank who, he said, would provide Mr. Diamantides with investment advice under his general supervision. Mr. Atkinson was not employed by the private bank but worked in a different part of the Bank as an institutional salesman selling emerging market investments. After that there was regular contact between Mr. Diamantides and Mr. Atkinson in the course of which Mr. Atkinson gave Mr. Diamantides investment advice which Mr. Diamantides invariably accepted and followed. All investments continued to be made in the name of Ursa. No one was surprised about that since it was, and no doubt still is, common practice among the Greek shipping community to make use of offshore corporate vehicles for investment purposes. Mr. Diamantides was the sole shareholder of Ursa and provided the funds for the investments made in its name. Insofar as Ursa made profits he enjoyed them and insofar as it suffered losses he suffered them. During this period Mr. Mellis and Mr. Atkinson regularly visited Mr. Diamantides in Piraeus. They also communicated with him frequently by telephone. Mr. Mellis often told Mr. Diamantides that he was a very important customer of the Bank.

Mr. Mellis left the private bank in 1994 and appears to have had no further involvement with Mr. Diamantides or his affairs. He was replaced by a Mr. Ferrazzi who was in turn replaced by a Mr. Gager in 1996. At some time in 1996 Mr. Diamantides decided to rearrange his affairs. He caused the portfolio held by Ursa to be transferred to Pollux of which he was likewise the sole shareholder. No management agreement appears to have been executed between Pollux and the Bank, but in all other respects things continued exactly as before. Mr. Atkinson and Mr. Gager continued to meet Mr. Diamantides from time to time and to speak to him on the telephone, Mr. Atkinson continued to advise Mr. Diamantides on investments and to manage the portfolio which was now held by Pollux and Mr. Diamantides invariably accepted the advice he was given. It is to be inferred that it was agreed between all concerned that the relationship between the Bank and Pollux was to be governed by the terms of the original management agreement.

During 1997 Mr. Diamantides substantially increased the amount invested in the portfolio using leveraged finance made available by the Bank. On the advice of the Bank some of the funds were invested in notes issued by the Bank which were linked to rouble denominated bonds issued by the Russian government. In particular, between February and April 1998 Pollux purchased from the Bank four notes of this kind for a total of a little over US40 million, 70% of the purchase price of which was provided by the Bank. It also entered into four corresponding repurchase agreements which were the means by which the finance was to be repaid and an agreement known as a Global Master Repurchase Agreement which was expressed to govern the repurchase by the Bank of all the GKO-linked notes. These notes together with their corresponding repurchase agreements are said to have been an unsuitable form of investment for Mr. Diamantides and one which he should not have been advised to undertake.

Unfortunately, in August 1998 the Russian government suspended trading in GKOs and shortly afterwards the rouble collapsed. As a result the value of the notes fell dramatically and the Bank called on Pollux to provide security in the form of margin payments for its obligation under the repurchase agreements. A dispute arose between Pollux and the Bank which closed out Pollux's position at a very substantial loss. Pollux contends that in doing so the Bank acted in breach of the terms of the various contracts between them.

On 7 ^th December 1999 Pollux issued proceedings in New York in which it purported to rescind the notes and made a number of other claims in relation to them. Those proceedings have since been dismissed on the grounds of forum non conveniens.

In April 2001 while issues of jurisdiction were still being contested in New York the Bank started proceedings against Pollux seeking a declaration that it was not liable in respect of any loss Pollux had suffered in connection with the 4 GKO-linked notes (action 2001 Folio 405) . Those proceedings were stayed by agreement pending the resolution of the jurisdiction issues. In that action Pollux has served a counterclaim seeking damages for breach of duty on the part of the Bank as its investment adviser.

On 6 ^th February 2004 Mr. Diamantides started proceedings against the Bank in his own name in England (2004 Folio 103) alleging that he personally and not merely Ursa (or later Pollux) was a client of the Bank for investment purposes and therefore a person to whom the Bank owed duties of care at law and in equity as well as duties of a fiduciary nature.

In paragraph 17 of his particulars of claim in the second action Mr. Diamantides made the following allegations:

"In accordance with common practice within the Greek shipping community, Ursa was an offshore corporate vehicle which was used exclusively for Mr. Diamantides's investment interests. In substance, its interests were Mr. Diamantides's interests: it was wholly owned and controlled by him and had no separate interests of its own. Mr. Diamantides was Ursa's sole source of funding and all the funds that were invested in the Portfolio came from him; all the investment decisions were made...