JP Morgan Chase Bank & Others and Springwell Navigation Corporation (No 4)
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE AIKENS,MR JUSTICE AIKENS |
| Judgment Date | 03 November 2006 |
| Neutral Citation | [2006] EWHC 2755 (Comm) |
| Docket Number | Case No: 2001/404 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 November 2006 |
[2006] EWHC 2755 (Comm)
The Honourable Mr Justice Aikens
Case No: 2001/404
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Mark Hapgood, QC, Mr Adrian Beltrami and Miss Catherine Gibaud (instructed by Clifford Chance, Solicitors, London) for the Claimant
Mr Michael Brindle QC, Mr Nicholas Lavender and Mr Jonathan Davies-Jones (instructed by Richards Butler, Solicitors, London) for the Defendant
Hearing dates: 4th, 5th and 6th October 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
(A) The action and the applications
In this action although Springwell Navigation Corporation ("Springwell") is the defendant, it is effectively the claimant. It is a Liberian Corporation. It is controlled by Mr Adam and Mr Spiros Polemis – AP and SP respectively. AP and SP, together with their mother, are the shareholders in the company. The Polemis family, which is of Greek nationality, has been involved in the shipping business for over 100 years and it is well known in the international shipping community.
The claimants in this action, who are effectively the defendants, are companies within the JP Morgan Chase Group of companies. They are concerned with banking and, amongst other things, trading in securities and other forms of commercial paper. I will refer to the claimants collectively as "Chase".
The current action was begun by Chase in 2001, seeking declarations of non-liability to Springwell. There have already been many contested interlocutory applications in the action. The case has been before the Court of Appeal on at least three occasions so far. The trial of the action is due to start in April 2007. The estimated length of the trial is 16 weeks. There will be large quantities of documents in the trial bundles and the witness statements of the principal characters in the story run to hundreds of paragraphs. Gloster J has been nominated as the trial Judge.
I will have to consider some of the particular allegations made by Springwell against Chase and Chase's responses in more detail below. But, in broadest outline, the complaint made by Springwell against Chase is that from 1987 Chase acted as the "private banker" of the Polemis family and the companies concerned with the Polemis family's shipping business. Springwell, which was acquired by the Polemis family interests in 1986, was the "treasury" of the Polemis group of companies. Springwell alleges that Chase, principally through its employee Mr Justin Atkinson, gave advice on the investment of profits that were generated in the shipping business of companies within the Polemis group and passed to Springwell as "treasurer" company of the group. Springwell alleges that from 1987 to 1998, on the advice of Chase, it purchased very large quantities of debt instruments which were principally linked to so called emerging markets, in particular those of South East Asia and Russia. By August 1998, these investments had a face value of some US$724 million.
Springwell alleges, but Chase vehemently denies, that all these debt instrument purchases were made on the advice of Mr Justin Atkinson. Springwell alleges that this advice was negligent because it was contrary to Springwell's known and stated investment objectives, which were capital preservation and liquidity and were conservative. Springwell also alleges that Chase treated it as a "Stuffee". That expression describes a client who is "stuffed" with commercial paper that no-one else will buy. It is further alleged that between May 1998 and August 1998 Chase acted fraudulently because it made implied representations as to the suitability of various investments in emerging markets, particularly those of Russia and Indonesia, whilst knowing them not to be suitable for Springwell's stated investment purposes.
In mid 1997, there was a collapse in the liquidity of the South East Asia market. Then in August 1998 there was a collapse of the Russian rouble and Russia defaulted on certain debt. Springwell says that as a result of that collapse it has suffered very large losses in the value of the portfolio it held as a result of advice that it received from Chase.
The collapse in the value of the Springwell portfolio gives rise to two principal heads of claim. The first is for the decline in value of the portfolio itself. The claim is for the difference between what Springwell alleges the portfolio would have been worth had the portfolio followed Springwell's alleged investment objectives and instructions, compared with the actual value of the portfolio. The second is a claim for the profits that Springwell says that it would have made on trading new ships that the Polemis group would have purchased with the Springwell investment portfolio if it had maintained its value, which it would have done if Chase had followed Springwell's instructions and investment objectives. This second head of damages has been called "the shipping losses" claim.
The total sums claimed by Springwell are well in excess of US$500 million. Interest is claimed on the principal sums claimed.
Chase denies that it ever gave advice on investments to Springwell. Its case is that it carried out orders to buy and sell investments as requested by Mr Adam Polemis. Chase also alleges that if, contrary to its primary case, it gave advice, then it did so competently and without negligence. Chase also says that Springwell was, for regulatory purposes, a "non – private" customer and that Springwell was treated as such. Therefore Chase was entitled not to give Springwell advice in relation to purchases that Springwell instructed Chase to make on its behalf.
There is a dispute as to the terms and conditions on which Chase acted for Springwell in relation to the Russian and Indonesian securities. Those that are particularly in issue are set out in a series of letters. These are known as the DDCS ("Dealings in Developing Country Securities") letters. Chase relies on them to avoid any liability. Chase also strenuously denies all allegations of fraudulent misrepresentation. There are many issues as to damages.
There are two applications currently before the Court. The first, dated 14 th September 2006, was issued by Chase. The application concerns expert reports which have been served by Springwell. The application seeks an order that three of the expert reports and one section of a fourth expert report served by Springwell be excluded from evidence at the trial. In each case the ground is that the evidence concerned is inadmissible and/or inappropriate and/or is not reasonably required to resolve the proceedings. I will describe the experts' reports concerned and the grounds on which it is said that they should be excluded in more detail below.
The second application arises out of an Application Notice that was issued by Springwell on 2 nd October 2006. This Application Notice relates to a number of matters, but only paragraphs 1 and 2 of it are relevant for present purposes. These paragraphs seek an order that paragraph 390(d) of the Re-Amended Reply to the Re-amended Defence and Re-Amended Defence to Re-Amended Counterclaim ("RRDC") dated 13 th July 2006 (and consequential passages) be struck out on the ground that it discloses no reasonable grounds for defending Springwell's claim for damages. Alternatively Springwell seeks summary judgment pursuant to CPR 24.2 on the issue raised by paragraph 390(d) of the pleading, on the ground that Chase has no real prospect of successfully defending that issue. Chase submits that I should order that this part of the application by Springwell should not be heard and determined in advance of the trial of this action which, as I have said, is due to start in April 2007.
(B) The relevant procedural history of the action
The first Case Management Conference ("CMC") in the case was held before Gloster J on 12 th November 2004. At that CMC, Springwell sought permission to call four expert witnesses at the trial. The fields of these experts were identified as "Russia and emerging markets", "private banking", "portfolio analysis and risk analysis" and "derivatives". At the CMC counsel for Chase accepted the admissibility of evidence on "Russia and emerging markets" but questioned whether expert evidence was, on the facts of this case, admissible or appropriate in relation to the other fields of expertise identified by Springwell. There was a long discussion at the CMC on the question of whether there should be expert evidence on "private banking". The Judge expressed considerable scepticism about the need for such evidence and suggested that the issues that would be likely to be covered by an expert report on that field would, upon analysis, prove to be issues of fact.
After discussion it was agreed at that CMC that it would be more efficient to determine the question of admissibility of expert evidence once Springwell had served its expert reports in the contested areas. Therefore (as recorded at paragraph 5 of the Order), the Judge ordered sequential exchange of reports, without prejudice to the issue of admissibility of the evidence. A timetable for service of the reports was laid down.
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