Mahmoud Haji Haider Abdullah and Others v Credit Suisse (UK) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 27 November 2017 |
| Neutral Citation | [2017] EWHC 3016 (Comm) |
| Docket Number | Case No: CL-2014-000811 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 November 2017 |
[2017] EWHC 3016 (Comm)
IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT
Royal Courts of Justice (Rolls Building) 7 Rolls Buildings, Fetter Lane, London EC4A 1NL
Mr Justice Andrew Baker
Case No: CL-2014-000811
Ian Mill QC and Daniel Cashman (instructed by SCA Ontier LLP) for the First, Third and Fourth Claimants
The Second Claimant in person
Richard Handyside QC and David Simpson (instructed by Freshfields Bruckhaus Deringer LLP) for the Defendants
Hearing dates: 28, 29, 30 November 2016; 1, 5, 6, 8 December 2016; 27, 28, 30 March 2017
Judgment Approved
CONTENTS
| Introduction | [1]–[14] |
| The Notes | [15]–[63] |
| — 2004 – Notes 1 to 4 | [16]–[26] |
| — 2005 – Notes 5 to 9 | [27]–[41] |
| — 2006 – Notes 10 to 14 | [42]–[50] |
| — 2007 – Notes 15 to 17 | [51]–[55] |
| — 2008 – Notes 18 to 20 | [56]–[62] |
| — Credit Suisse Notes Timeline | [63] |
| Investments Elsewhere | [ 64]–[67] |
| The Claimants at Credit Suisse up to March 2008 | [68]–[98] |
| The Cash Injection and Note 18 | [99]–[111] |
| Note 19 | [112]–[123] |
| Note 20 | [124]–[161] |
| — 7 October 2008 | [125]–[144] |
| — 8 October 2008 | [145]–[154] |
| — 9 October 2008 | [155]–[161] |
| Credit Suisse's Duties | [162]–[173] |
| Breach of Duty | [174]–[200] |
| — Note 18 | [174]–[186] |
| — Note 19 | [187]–[190] |
| — Note 20 | [191]–[200] |
| Primary Causation | [201]–[211] |
| 'Financial Suicide' | [212]–[243] |
| Contributory Negligence | [244]–[245] |
| Damages Calculation | [246] |
| Conclusion | [247] |
| Coda | [248] |
Introduction
The claimants are a father and three sons. In this judgment I refer to them by their first names when distinguishing between them. The Haider family is Kuwaiti by nationality and domicile and is very wealthy. The first claimant, Mahmoud Haji Haider Abdullah, is the father and head of the family. He completed a secondary school education in Kuwait but did not go to university; he has only very limited English. He established his business fortune initially through a very successful retail jewellery business founded in the late 1970s, subsequently expanding into many fields, including real estate, media, telecoms, financial services, medical services, energy, oil and gas, hospitality and retail.
The second claimant, Maytham, is a medical doctor, qualifying at the University of Kuwait in 1998. He also has a degree in Public Health and Policy awarded jointly by the London School of Hygiene and Tropical Medicine and the London School of Economics. Having practised for a few years as a GP, his principal career since 2003 has been in the medical services business and he is or has been a member of the Board of Trustees of the University of Sciences and Technology, Kuwait, and of the University of Kuwait. He has also served on the boards of other businesses, including the family holding company, Al-Zummorodah Holding Company, and its financial services subsidiary, Zummorodah Investment Company (known as Z-Invest); and in 2006, he was approved by the Qatar Financial Centre Regulatory Authority to have an 'Executive Governance Function' for United Gulf Financial Services Company.
The third claimant, Mahdi, has an undergraduate degree from the University of South Florida in Management Information Services and an MBA (Marketing and International Business) from the University of Miami. He spent four years at Al Ahli Bank in Kuwait, gaining some experience across all of its activities (although I did not have any real evidence as to what those activities entailed); then from 1998 his primary occupation was as director of sales and business development at Wataniya Telecoms, to which I refer further below. He was a vice-president of Al Qurain Holding Company, whose core business involved investing in listed and unlisted companies. He was also, from 2005 until 2008, chairman and managing director of Al-Zummorodah Leasing and Financing Company; and for a time he was chairman and managing director of Z-Invest.
The fourth claimant, Mansour, is a graduate of the Commercial College at the University of Kuwait with a degree in Marketing. He has spent his working life to date in the family's media business in Kuwait.
The Haider family's interest in the telecoms sector took the form of a shareholding in Wataniya Telecoms. That interest, together with the interests of other shareholders, was sold through the Kuwait stock exchange in 2003 for US$1.5 billion, generating cash of US$150m for the family. That very large, public transaction generated numerous approaches to the claimants on the part of western banks offering investment services. One such was Credit Suisse and as a result, from April 2004 the claimants were joint account holders and clients of Credit Suisse's London-based private banking business carried on by Credit Suisse (UK) Ltd, the first defendant. Their relationship manager was Mahmoud Zaki. The Haider family as constituted by the four claimants would no doubt be characterised as an 'ultra high net worth' client by any private banking investment service. I did not have comprehensive evidence of the family's total wealth, but I am satisfied that during the period when they were investing in structured products through Credit Suisse, from mid-2004 until late 2008, their net worth was of the order of US$500 million (at least).
Once the private banking account was set up, there was effectively no contact between Mr Zaki or anyone working under him and either Mahmoud or Mansour. All relevant dealings and interactions during the life of the account were conducted by Mahdi or Maytham on behalf of the family. In fact, as I shall describe, there was precious little contact with Mahmoud even to set up the account. Once the account was opened, it was used by Mahdi and Maytham to invest on a leveraged basis in structured products ('Notes'), sold to them by Mr Zaki.
These proceedings arise out of the global financial crisis and, in particular, the market turmoil in October 2008 following the collapse of Lehman Brothers in mid-September 2008. At that time, the claimants were invested through the Credit Suisse account in three Notes of a product type labelled 'SCARP' by Credit Suisse. SCARP was an acronym for Structured Capital-at-Risk Product. The claimants had an investment in those Notes net of borrowing of c.US$26m; the aggregate redemption value, if the Notes redeemed at par, was US$58.4m. One of the Notes was issued by BNP Paribas rather than Credit Suisse; the issuer of the Credit Suisse Notes was Credit Suisse Securities (Europe) Ltd, the second defendant. All the Notes were sold to the claimants as private banking clients of Credit Suisse by Mr Zaki.
The claimants had also borrowed c.€5.8m from Credit Suisse, equivalent in late October 2008 to c.US$7.6m, and had cash at Credit Suisse of c.US$10.3m, so there was a cash surplus above their Euro loan of c.US$2.7m.
At the end of October 2008, Maytham and Mahdi chose not to meet a margin call issued by Credit Suisse, resulting in the liquidation of their investment in the Notes, as Maytham and Mahdi knew and intended it would. The claimants suffered thereby a total loss of their net investment in the Notes and their surplus cash at Credit Suisse and indeed were left overdrawn at Credit Suisse by US$336,275.60. It is common ground that the claimants owe that final overdrawn amount to Credit Suisse, subject to the impact of their claim. That is not to say that the claimants necessarily have a claim (if they establish liability) for the full amount lost by them at Credit Suisse (on a simple view, c.US$29m as at the end of October 2008). Any damages claim must compare the actual outturn (c.US$29m lost then) with the outturn that would have resulted upon a hypothesis tailored to reflect the court's findings as to liability and causation.
For example, if, without any breach of duty by Credit Suisse, the claimants would have held to maturity, and suffered loss on, at least some of the Notes purchased from Credit Suisse, then that must be brought into account in any damages assessment. Or, to take another example, choosing to have their investments closed out at the end of October 2008 cost the claimants, in the event, c.US$21m as against retaining the Notes then held to maturity, meeting the October 2008 margin call and any further margin calls that might have been made along the way. Therefore, if the consequences of that choice are to be visited upon the claimants, that will have a very significant impact on the amount of any damages award. In that regard, Credit Suisse's case is that the claimants' refusal to meet the October 2008 margin call was so unreasonable as to amount to a failure to mitigate loss, or was the sole cause of loss to the extent it increased loss, or broke any chain of causation, which may be three different ways of saying the same thing.
Financial market conditions in October 2008 were extraordinary. As anyone reading this judgment is likely to know already, they were, or were a reflection of, a once in a century financial shock. It can be important in such circumstances to distinguish between risk, as a function of the terms of an investment, expressed by identifying the events in which, if they occur, an investor will or may suffer loss, and risk expressed as an assessment or opinion as to, or quantification of, the chances of one or more such events occurring. An investor in structured notes who says he invested thinking his capital was 'safe', or the investment was...
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